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Brickvest's Lumineau: BoE Rate Rise Sign Of More To Come

Commenting on how the Bank of England has voted to raise interest rates for the first time in more than a decade, Emmanuel Lumineau, CEO at BrickVest, said:

“Today’s announcement is momentous for the UK economy and should signal the start of a series of gradual increases. The Bank of England has decided that inflation is potentially getting out of control and the economy now requires higher borrowing costs. The decision also signals that the UK economy has not performed as weakly as the Bank predicted last year.

“Increasing interest rates has a direct impact on real estate. Higher interest rates and rising inflation make borrowing and construction more expensive for owners, which can have a constraining effect on the market but can also lead to an increase in property prices. There has certainly been an abundance of international capital flowing into real estate, almost every major institutional investor globally has been increasing their portfolio allocation to real estate over the last five years mainly because of lack of alternatives.

“We continue to see the highest level of volatility from the office sector as many international firms currently headquartered in the UK put decisions on hold over their long-term office space requirements. If the UK no longer gives businesses access to the European market, they may need to spread their staff across multiple locations to more efficiently access both the UK and European market. Indeed our recent research showed that 34% of institutional investors believe the biggest real estate investment opportunities will be found in the office sector and the same number in the hotel & hospitality industry over the next 12 months.”