UK Economic and Real Estate Briefing – June 2021
Despite the surprisingly sharp rise in inflation, the BoE are unlikely to make a change to monetary policy, as they do anticipate a temporary period of strong economic growth and above‑target inflation. There are two causes of inflation, demand-pull and cost-push, both of which will impact real estate returns.
Inflation is likely to continue its upward trend, remaining above target at least until the end of 2022. BNP Paribas expect the BoE to raise rates in the final quarter of 2022 by 15bps to 0.25%.
Evidence of prime yield compression continues to emerge. This is encouraging investors to bring forward more disposals. With bond yields and inflation still significantly below historical levels, we anticipate liquidity with continue to build.