Updated: Jun 30
By Maria Lazar
The cost of living crisis has been felt greatly by the British public over the past few months. For some, this change in the economic sector meant reducing certain luxuries, such as expensive holidays or designer-brand clothing. For others, it meant a shift from a relaxed lifestyle to living paycheck to paycheck. In the words of renowned economist Joseph Stiglitz, "Inequality is not just about the size of our wallets. It is a socio-cultural construct that, more than anything else, crushes the human spirit." These powerful words encapsulate the dramatic effect produced upon individuals and families by the ever-rising cost of living.
But what is the cost of living crisis? This socio-economic phenomenon is defined by the rising prices of necessary goods, without a directly proportional rise in wages. While most areas of everyday life have been impacted by the cost of living crisis, the rising costs of utilities and groceries have been at the forefront of the conversation regarding this crisis. The cost of utilities such as electricity, gas, and water has increased considerably in recent times, putting a significant financial strain on the average household. Similarly, the cost of everyday groceries has risen considerably.
According to experts, the pricing of food and non-alcoholic drinks has increased by 19.1% in 2023. The most drastic price increase is for cheddar: 49 % increase in March 2023 compared to March 2022. (https://www.bbc.co.uk/news/business-65312127). Milk is a close second, with a 40% increase, followed by other staple items such as eggs, (28%), chicken, (25%), and bread (21%). With this steep increase in everyday groceries, more and more people are struggling to make ends meet daily. These daily struggles are echoed on a macro plan. The housing market reflects the long-term, big-picture issues created by this cost of living crisis. According to statistics, 1 mil homes were bought and sold in the UK in 2020, followed by a considerable increase in 2021, when 1.4 million homes were sold, the highest amount since 2007. As the cost of living crisis deepened, the housing market saw a decline, with only 1.2 million houses bought and sold in 2022. Different property types saw different rates of price increases, with detached houses remaining the most expensive and flats or maisonettes the cheaper option.
The housing market contraction has affected first-time buyers considerably. As COVID-19 was highly affecting all areas of life in 2020, the housing market was no exception, with little over 300000 people buying their first homes. This increased considerably in 2021 when more than 400000 first-time buyers were able to hop on the property ladder. The cost of living crisis reverted this positive increase when in 2022 only 370287 people were able to afford their first home.
The affordability of housing becomes a major concern as the cost of living crisis unfolds. Overall, the cost of living crisis has influenced various areas of the economy, including the housing market. Higher expenses in other areas of life, such as everyday bills and groceries, make it increasingly difficult for individuals and families to allocate sufficient funds for housing costs. The increased cost of living is leading to decreased affordability and challenges in homeownership (especially for 1st-time buyers), constraints on housing supply, and potential contractions in the housing market. This, in turn, can lead to reduced demand for housing, particularly in regions where the cost of living has escalated dramatically.