How to Move During Uncertain Times

If you are a tenant in the UK, you are probably going through a rough financial period. The prices of the products and services you need, and possibly your rent, have increased drastically in recent months while your income has remained the same.

The reality is that you are becoming poorer by the minute because of inflation. And you might think it is what it is and there’s nothing you can do about it, which is not true.

Suppose you are already experiencing the tightening grip of inflation, which is eating into your savings. In that case, you will naturally realise that downgrading your rental situation is probably a reasonable step towards stabilising your personal finances.

In other words, there are certain steps that you can take to stabilise or even improve your financial situation. But to do that, you need to understand the macroeconomic circumstances that have brought us all to this point. The end of tenancy cleaning specialists at Fantastic Services have taken the time to analyse the situation and provide you with tips for a smooth move: 

What is inflation, and how is it making you poorer

People experience inflation through increased prices of goods and services. Essentially, the buying capability of a currency is lowered, and you need to spend more to afford the same things you need.

While some politicians would like you to believe that a single culprit is responsible for the economic decline, inflation is a complex phenomenon caused by many factors. However, it can be affected by global events (such as the recent Covid pandemic or the raging war in Ukraine). Increased supply chain demand and shortage of goods are two contributing factors that stand out as they are directly correlated to the rise of inflation.

Because the local and global economies are connected, it can be said that inflation causes a chain reaction effect. Here’s an example: during times of economic growth, people earn more money and increase their savings. As interest rates are low, they can borrow more money from banks to fund their businesses and purchase real estate. 

This amassing of personal finances leads to improved quality of life and increased consumer behaviour. Which leads to higher supply chain demand and, in some cases, a shortage of goods. This causes an increase in the prices of goods and services. Which causes inflation.

As you can see, it is a vicious cycle that can be slowed down or exacerbated through events that affect us on a global scale. For example, a shortage of fuel and gas can cause an energy crisis. This increases the energy costs that we use to power our houses or manufacture goods.

Common effects of inflation

Inflation is the macroeconomic mechanism through which economic growth is stunted and reversed. Here are some of the effects of inflation.

  • Shortage of goods and services
  • Price increase of goods and services
  • Price increase in real estate and rentals
  • Personal savings shrinkage
  • Increase in credit interest rates
  • Currency depreciation
  • Downsizing of businesses
  • Bankruptcy
  • Unemployment

The diminishing value of money

As inflation increases, the very value of money diminishes. In other words, the same amount of money buys you less and less. Therefore, we experience higher prices for goods, services, and rent.
You can imagine how this could quickly turn into a personal catastrophe for, let’s say, people who need expensive medication to stay alive.
However, a nationwide catastrophe is what awaits us all if inflation happens rapidly at an exponential rate. This is what is known as…

Hyperinflation

Hyperinflation is the term used to describe monetary inflation at a very fast rate. It is caused by a total collapse of the economy, which can be brought through an industrial crisis or war.
When hyperinflation occurs, people lose their life savings. Many lose their jobs and homes. Civil unrest and crime rate rapidly increase. So we can say that hyperinflation is more than just the collapse of the economy – it is the collapse of society as we know it.
While this possibility is grim, you shouldn’t worry too much about it. The Government and the Bank of England are well-aware of how inflation can rise rapidly, so they are being extra careful through their economic policies.

Economic recession

Rising inflation inevitably leads to a widespread drop in spending which causes an economic recession. This period of economic decline is characterised by lower trade and industrial activity.
In other words, most people will probably not be able to get the latest iPhone once it rolls out. Some will have to let go of their beloved car and return to the good old modes of public transportation. Who would have guessed that inflation is kind of beneficial for the environment, right?

Low-income consumers are hit the hardest

Unfortunately, such economic turbulences profoundly affect the lives of the lowest-earning members of society. People may lose their jobs, lose their homes, and become unable to afford essential goods such as food and medicine.

The link between inflation and unemployment

If you are a working-class citizen, one of your biggest concerns about inflation is the possibility of losing your job. As consumer spending drops, businesses are left with no other option but to let go of some of their staff.
Not to mention that entire businesses have to close down as they cannot sustain their operations. This is another good example of the chain reaction caused by inflation. As businesses downsize or totally close, they are letting go of workers who are consumers of other goods and businesses. Which leads to more downsizing and unemployment.

How inflation affects the housing market

It is becoming more expensive to build and purchase real estate. Because developers have to pay more for raw materials to build housing, they are forced to sell properties at more expensive rates to make up for their initial spending.
At the same time, existing housing is simply going up in value. Which forces consumers to take higher loans from banks. At some point, the loans and their interest rates become so high that purchasing a property during such times is no longer feasible. Which essentially stunts the housing market as well.

Inflation hits tenants particularly hard

Being a tenant during times of economic recession can put you in a difficult situation. As landlords are experiencing the effects of inflation like everybody else, they may have to increase the earnings they get from their assets – thus, tenants experience an increase in the rent they have to pay.
As a tenant, you might have to make a difficult decision. If your landlord has increased your rent, then you may have to move out. Otherwise, a significant portion of your income will go toward your rent. Which is something that might not align with your long-term financial goals.

How inflation affects moving

As fuel, raw materials, and vehicles increase, so do moving services’ prices. This means you will be paying more to move out now than you could have if you had decided to move a couple of years ago.
The good news is that the expenses will balance themselves out in your favour if you move to an area with cheaper rent. Or if you decide to move back into your parents’ house.