By Charles Feguson-Davie
Yesterday’s decision to maintain the Bank Rate at 4% was accompanied by comments that ‘CPI inflation is judged to have peaked’ and that ‘If progress on disinflation continues, Bank Rate is likely to continue on a gradual downward path’, which pave the way for a potential cut in December, which would be most welcome. Whilst a lower Bank Rate would be helpful for the economy, we also need lower gilt yields to help deliver a lower cost of capital for UK investment and support the real estate recovery. The 10-year gilt yield has reduced by approximately 25 basis points over the last month, but further falls would be beneficial.”
At Moorfield, we have intentionally chosen the Living and Storage sectors that are supported by structural drivers of demand, so that we are less exposed to the economic cycle and supported instead by inflation-linked and needs-based fundamentals in undersupplied sectors. Higher taxes, which are expected in the upcoming Budget, will not encourage development or investment, which the UK certainly needs, but at least low levels of supply will continue to lead to rental growth for those assets that are in demand and fit-for-purpose for the future needs of occupiers.