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A bunch of FTSE 100 shares are rising this morning after the UK’s December consumer price inflation figure came in slightly lower than expected at 2.5%.
It is instructive to see which ones are at the top. It suggests that they are the ones who stand to benefit from lower income and interest rates – if we finally get them. Should investors consider buying them?
A house builder Barratt Redrow (LSE: BTRW) fell 3.67% today (15 January) as investors digested a positive inflation surprise. It is time for them to see the stock price rise. The stock is down 25% in 12 months, and 40% in three years.
Can the share price build on this?
Inflation and interest rates are making mortgages more affordable for prospective home buyers. This should increase demand and house prices, driving sales and income. Inflation will also reduce the cost of materials such as timber, steel and cement, and suppress wages. All will improve profit margins.
Barratt Redrow shares look decently priced, with a price-to-earnings (P/E) ratio of 14.2. paid a dividend of 3.88 %. I won’t be too happy though. Inflation is expected to reach 3.2% in the spring, as budget tax increases and minimum wage increases take effect, as well as Donald Trump’s tax cuts and trade tariffs. Investors may have to be patient.
The same principle applies to another stock flying this morning, the commercial real estate investment trust (REIT). Real Estate Securities (LSE: WORLD). Its shares are up 3.65% as I write, as inflation and borrowing costs will ease pressure on the company which had total debt of £3.6bn in September.
They will also make it easier to finance new developments and rehabilitate existing properties, as well as support rental benefits and abatement.
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Lansec gives a good yield
Until we get there, volatility may continue. Lansec’s share price has fallen 22% in one year and 32% over three.
Yet it looks good value with a P/E of just 10.6, while yielding a blockbuster 7.2%. Again, investors should be patient as inflation remains sticky. Working from home also reduces the need for office space while struggling consumers spend less at retail outlets. Diversifying the group into a mixed-use development can reduce some of the risks.
Not surprisingly, my third stock in recovery mode is also in the real estate industry, a student housing specialist Get the team together (LSE: UTG). Low borrowing costs would make expanding its property portfolio cheaper and easier, while stable inflation would support predictable rent growth.
Unite’s share price has also fallen sharply, down 24% over the past 12 months. It’s not very cheap though, with a P/E of 17.8. The yield is 4.4%.
Unite could be influential if Labor tries to reduce immigration by tightening student visas, meeting the demand for accommodation.
Today, occupancy rates for the 2025/26 academic year are expected to be 97-98%. CEO Joe Lister is looking into that “the outlook for student numbers remains positive with the UK’s growing 18-year-old population and improving international student recruitment trends”.
I expect all three to come to life once inflation starts to decline and central banks shrink. The problem is, that may take time. All three are worth considering, but from a long-term perspective as I expect continued ups and downs.
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