Are We Facing Series of Crises?

I was on the way to home from office when I heard two guys talking about the slowdown in the economic conditions and that they were lucky enough to secure their jobs despite the cut in their monthly pay. It was when that I came across the ‘feature’ in the newspaper about rental trends  . The feature starts like this: “Heard the one about the Russian, the Spaniard and the American? They were all trying to rent the same house in Brompton Square. The Russian thought it was his when he bid £5,000 a week for a five years term. But he was gazumped by the Spaniard who then gazumped by the American, who offered £8,000 a week”.

The American who rented the house will be paying over £2 million over a five years term, amount enough for a low-income family to buy a house in nice suburb. This depicts that, we are, and will be heading towards a series of crisis. With inflation over 4.5 percent against a target of 2 percent, this is another drag on the households’ disposable income who are at the moment hardly meeting their consumption needs.

Rents have increased over 14.5 percent over the past year eventually pushing average selling price of house over £450,000 last month. The rents are expected to increase due to the increase in population of the city in terms of migrants and expected increase in number of students who can afford to pay high rents to live in smarter areas. The increase in population of the City due to Olympic next year will also fuel up the rents of the City.

The households who rented properties due to financial crisis rather than buying (taking out mortgages) no longer can think to become homeowners due to drag on their income that will probably be long-lasting.

The surge in rents will take the major proportion of their disposable income forcing the households to cut down their consumption even further, thereby further depressing the economic conditions. If appropriate measures are not taken soon we will be witnessing ‘no economic growth’ which has expanded ‘negligible’ 0.2 percent in the second quarter of 2011 over first quarter.

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