25th October 2021

How will the energy crisis affect Cheshire residents?

The rise of energy prices is expected to continue, which will contribute to the growing cost of living, and owning, renting, or letting a property in Cheshire.

The media has seen a fair share of articles relating to the rising prices of wholesale gas, which as a result, has had a knock-on impact on smaller energy suppliers. With no limited funds to protect them, they have been forced out of the market seemingly overnight, with the cost of living for Cheshire homeowners and tenants being affected. 

There are a number of scenarios that could unfold as we head towards the winter months:

More energy suppliers disappearing

The financial pressure on energy suppliers is increasing, particularly if they haven't protected themselves by hedging their energy demand, or agreeing on contracts in advance (particularly when it was cheaper to buy). As a direct result, these energy suppliers may be unable to cover their costs and above what their customers are paying, which in turn will lead to being forced to cease operations.

The number of smaller suppliers that make up the market is estimated to be around 30 per cent, but they are typically favoured by many tenants across the region. Cheshire landlords need not worry, however. If you are a Cheshire landlord, and should your tenant's energy supplier go bust, your tenants won't lose their money if they have a credit balance (such as direct debit payments). Their supply of gas and electricity is secure, even if their supplier falls through thanks to the safety net provided by regulator OFGEM's "Supplier of Last Resort".

Energy prices will continue to rise

From October 1 2021, the cap on the price that energy consumers pay was increased. The maximum costs Cheshire homeowners, tenants and landlords pay per unit of energy still has a ceiling, but energy bills will now have grown by an average additional annual cost of £139.

The cap is calculated by the regulator OFGEM, which means the next increase for bill payers can be anticipated. The cap will next be reviewed in April 2022, which could see energy bills jump by £400 - £500 annually on average. For many Cheshire households not on a fixed energy deal, this is a genuine addition to the cost of living of over 50 per cent.

The struggle for low-income households

Households on low-income earnings tend to spend 10 per cent of their annual salary on their energy bills. With lower incomes usually comes lower quality of accommodation, which typically yields lower energy efficiency. The lower the energy efficiency, the higher the energy costs. This means, particularly for some Cheshire tenants, that they may face difficult decisions relating to bill spending, particularly when it comes to heat or nutrition. Off the back of the pandemic, a number of tenants felt that their income wasn't secure, adding further pressure to their ability to pay rent.

If you are a Cheshire landlord, you need to be prepared to inform any tenants struggling to pay their rent of financial help available to them, whilst also suggesting they speak to their energy provider in the meantime. For those with suppliers who collapse, you can advise your tenants to check where their new supply will come from using Goodlord's energy supplier tracker.

How will Cheshire landlords be impacted?

Landlords who include bills within rental payments (particularly those who own a portfolio of co-living HMO properties), should ensure all costings are considered appropriately moving forwards; whether that be when assessing rent reviews, or letting new rooms/properties. Shopping around for fixed-price deals may be more expensive than a variable deal upfront, but they have the potential to be cheaper in the long run. Considering the likely increase in variable prices in April 2022, investing in a fixed-price rate could be the better option for you. Everyone, however, whether a homeowner, landlord or tenant, should actively run comparisons to find the best deal for their respective properties to keep the costs minimal in the meantime. 

 

How will this affect my Cheshire property development/conversion project?

Regardless of the scope of your project, it has never been more important to assess the possibilities of implementing as many energy-efficient and saving methods. It is very possible this may not be the most cost-effective strategy upfront, but in the long-term, it will save you or the new landowner in costs.

If you have no intention of retaining your development on completion, be it a housing project or a barn conversion, energy efficiency is likely to become a much larger factor considered by prospective buyers. Having these assets to hand could be a valuable weapon in your arsenal when it comes to marketing your development.

If you have any concerns relating to the costs of energy when it comes to buying or selling your property, or want to know more about the most effective energy solutions relating to your land or property development, give Richard and Simon a call on 01565 656544.

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