Will the Energy Bill Crisis Affect the Property Market?
The energy crisis has been in the making for a while. The rise in costs is impacting householders in the UK in a variety of ways. But is it significant enough to affect the property market?
What Is The Energy Bill Crisis?
There is a worldwide shortage of energy affecting a large number of countries. UK oil and gas suppliers are reporting that their costs have increased by 250%. The price rise is due to a number of factors. As businesses have been getting back to normal, they have caused a surge in demand. Adding this to the cold winter and low supplies following the pandemic has put a lot of pressure on the energy companies.
Since 2021, over 30 energy suppliers are now out of business. This has caused a lot of turmoil for their clients. Even for those who aren’t dealing with collapsing companies, they are still having to deal with sharply rising prices. Ofgem agreed to a price rise of 12% before Christmas. At the next review in April, prices are set to go up again. In real terms, people will be paying on average £700 per year for their bills.
Effect On The Property Market
Many think that a cost of living increase might not directly impact the property market. However, there are some significant ways it can have an effect.
Around 23% of the UK population live around the poverty line. That means that for these people moving may slip out of reach. There are a lot of costs involved in moving home. Simply moving can be in the thousands. If households no longer have the spare cash to pay for these costs, they may not be able to make any changes to their living situations.
The rise in cost is going to have a larger effect on people living in homes with lower energy efficiency ratings. This may be enough to make the homeowners consider moving home. This could lead to more interest in newer homes that are built to higher energy standards.
With energy being a priority for homeowners, it could lead to a shift in house prices based on EPC (Energy Performance Certificates). Better rated homes may be worth more. Older homes that are less efficient and in need of basic insulation measures or improved glazing might be less attractive and attract lower prices.
The rise in energy prices is likely to put some strain on the rental market.
Renters who pay their own energy bills might need to find themselves struggling to meet the new cost of living. This is especially true for those who are currently scraping by. Some may be unaware of the impending cost rise. Even those who know that the prices are set to rise again may not be able to cover the costs. The result of this could be more renters falling into arrears.
Landlords and agencies who cover the cost of energy bills for their tenants will need to start budgeting for much higher costs. The increase is going to be significant and trying to figure out how to manage the costs without losing tenants will be a challenge. This will be most true for those who manage older properties.
Come April; when the energy hikes come into force, we will start to see how the knock-on effects of the property market will begin to play out.