Stirling Ackroyd’s view on the Cost-of-Living Crisis.
The cost-of-living crisis is firmly with us. Expertly forecast by our analysts some months ago, the financial spectre has materialised as a concern for all. But while it might feel like an impossible predicament, one thing is for sure – it will not last forever.
“Solutions will be found to restore the stability of the lives that we lead, meaning that the current crisis is likely to come to an end in months plural, rather than years,” Karl Le Brasse Managing Director of Stirling Ackroyd Sales predicts.
“The property industry knows how to navigate a crisis. We demonstrated that during 2008 and onwards – and again in the pandemic. The difference now is that our current problems are made up of far more left-field factors such as war and energy prices. So for now, we just have to adjust to market conditions, and guide our customers – new and old – using our extensive forecasting abilities and experience.”
Average rents have also increased by 7.1% in a year.
The Challenge – Explained
The combination of supply chain disruption, a global energy crunch exaggerated by the war in Ukraine, market inflation, rapidly rising rents, limited property supply fuelling record (though now stabilising) property prices, and higher interest rates have created an unprecedented cost of living crisis. This is predictably chilling rather than cooling the UK property market’s confidence.
Careful next steps need to be taken by the powers-that-be to resolve a crisis that influencers like Martin Lewis, Money Savings Expert’s founder, are saying is a “pandemic-scale national crisis.” More news on this is expected in the coming days as the UK’s Prime Ministers in the wings, and a host of government advisors and fiscal experts, consider optimal next steps to ease Britain’s householder’s ever-growing financial burdens.
A Pocket Punch Not A Pinch
“Energy bills and in-pocket disposable income is a major decision-factor when it comes to changing homes,” Karl, continues. “Real disposable household income is a good measure of the cost of living, and affordability is now everything.
“What is new to the market is just how far contingency and savings provide the necessary comfort factor for almost all significant transactions, not just property.
“That is why we are seeing what we regard as a temporary change in market trends. Those that are well-funded, ready to make cash purchases, or have a cash reserve plus a low loan-to-value mortgage, really are in the driving seat in the months ahead.
“Prices have already begun to stabilise, which is no bad thing. So there are going to be good deals to be had for buyers that are essentially ready-to-go.”
Good advice matters when renting
When asked how the rental market has changed, Karl explains, “Landlords on fully managed contracts have always trusted us to protect their properties, physically and financially, while optimising revenue and reducing losses during times of universal tenant challenge.
“We are here to mediate – to work with tenants that may find themselves in financial difficulty. Keeping dialogue open between tenants and landlords is exceptionally important, and we are experts in that field.”
“If you are a Stirling Ackroyd managed tenant, we can help you renegotiate your annual rent rise. For landlords, we are strongly advising that reliable tenants should be encouraged to remain past the standard 12-month rental renewal period, if practical to do so. Stability is key for all in the rental space.”
Rent Market Review
Rents account for an average 30.5% of a renter’s gross monthly income (up to 34% in London). With inflation at 9.1% – a 40-year high and predicted to rise further – households are feeling a punch not just a pinch. A recent survey of over 12,000 renters nationwide conducted by Dataloft with HomeLet in May 2022 found that 75% of renters are concerned about the impact of the cost-of-living crisis on their ability to pay rent.
Renters who have come of age in the midst of the cost-of-living crisis are the most concerned, with 85% stating the crisis will have a significant or moderate impact. More than one in four rate the impact as ‘significant’. Interestingly, just 11% of renters feel the cost-of-living crisis will have no greater impact on them than on previous generations.
*Source: Dataloft, HomeLet, national survey of 12,000 renters May 2022.
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Successful Sales In Challenging Times
“As regards sales and purchases,” says Karl, “we typically represent one party or the other. That said, we have found that a precision approach to balancing the interests of all parties is key to keeping a sale moving towards a successful conclusion. By understanding what everyone wants and needs, Stirling Ackroyd helps all parties get to where they need to go, no matter how challenging the environment. We proved this during the pandemic, we are proving this now, and will continue to do so.”
Sales Market Review -UK figures show that average house prices have risen by 7.2% over the course of the last year, but property sales and lettings in the UK have fallen dramatically since the start of 2022. The number of houses put up for sale has dropped by 47.3% according to the latest figures from the Office for National Statistics. Meanwhile, the number of new tenancies has fallen by 31.1%.
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