UK Property Cost of Living Crunch Q4

Friends,

Inflation is truly hotting up with the full effects of energy rises about to be felt the price of locking down the global economy is about to be felt. As previously discussed in newsletters and conversations, the lag is about 12-18 months from printing to be felt across the economy, after which prices tend to stabilise. We are now going through those growing pains, and it will take some 12 months more to truly get a handle of things if we adopt sensible monetary policy today. 

The difficulty we have as a country is that we are in the throws of a leadership race, with votes to be won from a small collection of people that are members of the conservative party. With the next General Election to be held no later than January 25th 2025 the current race is unlikely to cater solely to the members’ of the conservative party’s interest; something needs to be done to assist those on lower incomes, current blanket policies of assistance are, in my view, misguided. They do nothing to direct assistance to where it is needed most, and risks leading to further increases coming down the inflation pipe if not balanced by fiscal spending elsewhere. 

The challenge of affordability will be felt by those on fixed and lower incomes, and there will be little that can be done in the short-term but to tighten spending in the short term. Historically there have always been discussions around the challenge of pensioners affording to heat homes during the long winters, this winter the cost of doing so will be significantly higher. 

Low and fixed income households will struggle through the Winter – can Gov direct resources effectively to these individuals without borrowing (and further inflating) and without alienating the Conservative party voting base?

What does this mean for Landlords? 

Good quality, energy efficient, accommodation will be the hot property this winter, likely to accelerate demand for a greener product we envisage tenants will have an eye on EPC registers and renovation standards in a way not noticed before. 

The green wave has been something on the periphery that many have engaged with when convenient. Rentals that do not have these efficiencies are going to find the rise in bills to become very inconvenient, as this affordability crunch has potential to deter tenants from occupying homes.

What can be done?

Landlords who are renovating stock going forward need to have an eye on efficiency of heating and draft proofing properties. This can easily be achieved when renovating with a considered approach and this in mind.

The real churn will begin with properties that are in desperate need of refurbishment, with a probable 5 figure bill to do so regardless of where your portfolio sits in the country there will be significant temptation from historic landlords to sell less efficient stock than retrofit to the higher EPC standard required, a standard that is much easier to achieve with new builds and conversions than solid brick 1890 victorian terraces. 

Landlords with portfolios that predate the Global Financial Crisis: 

What are you doing about the increasing regulation of EPCs with your historic units?

I would like to hear from you.

Kindest, 

Dan & the Team