A heap of FTSE 100 shares are climbing this morning after the UK’s December consumer price inflation figure came in slightly lower than expected at 2.5%.
It’s instructive to see which ones are on the up. It suggests they’re the ones to benefit from lower inflation and interest rates – when we finally get them. Should investors consider buying them?
Housebuilder Barratt Redrow (LSE: BTRW) has jumped 3.67% today (15 January) as investors digest the positive inflation surprise. It’s about time they saw some share price growth. The stock’s still down 25% over 12 months, and 40% over three years.
Can the share price build on this?
Falling inflation and interest rates make mortgages more affordable for prospective homebuyers. This should boost demand and house prices, driving up sales and revenues. Lower inflation will also cut the cost of materials such as timber, steel and cement, and put a lid on wages too. All would boost profit margins.
Barratt Redrow shares look decent value, with a price-to-earnings (P/E) ratio of 14.2. The dividend yield is a solid 3.88%. I won’t get too excited though. Inflation’s expected to hit 3.2% by spring, as Budget tax hikes and minimum wage increases kick in, along with Donald Trump’s mooted tax cuts and trade tariffs. Investors may have to be patient.
The same principle applies to another share that’s flying this morning, commercial real estate investment trust (REIT) Land Securities (LSE: LAND). Its shares are up 3.65% as I write, as lower inflation and borrowing costs would ease the pressure on a company that had net debt of £3.6bn in September.
They would also make it easier to fund new developments and refurbish its existing estate, as well as supporting rental yields and minimising defaults.
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Landsec offers a brilliant yield
Until we get there, volatility’s likely to continue. The Landsec share price is down 22% over 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 have to be patient as inflation remains sticky. Working from home is also hitting demand for office space while struggling consumers spend less at retail centres. The group’s diversification into mixed-use developments could mitigate some of the risks.
It’s hardly a surprise that my third stock in recovery mode is also in the property sector, student housing specialist Unite Group (LSE: UTG). Lower borrowing costs would make expanding its portfolio of properties cheaper and easier, while stable inflation would support predictable rent growth.
The Unite share price has also taken a beating, falling 24% over the last 12 months. It’s not super cheap though, with a P/E of 17.8. The yield’s 4.4%.
Unite could take a hit if Labour tries to reduce immigration by tightening student visas, hitting demand for accommodation.
Today, occupancy levels for the 2025/26 academic year expected to be 97-98%. CEO Joe Lister reckons that “the outlook for student numbers remains positive with a growing UK 18-year-old population and improving trends in international student recruitment”.
I expect all three to spark into life once inflation really starts falling and central banks get cutting. The problem is, that could take time. All three are worth considering, but with a long-term view as I expect further ups and downs.
