Beware Matcha Latte Drinkers, As Property Investment Collides With Cost-Of-Living Demographics

Students and young city dwellers are seeing the biggest drop in their disposable income during the current cost-of-living crisis, new research has found, with the property types that rely on these groups the most likely to see demand drop. 

Last week Bisnow introduced you to Deano, the archetypical winner from 10 years of loose UK monetary policy, the person whose disposable income has kept a great deal of commercial real estate in business.

With interest rates and inflation rising, the average UK household is now about to find its cheap-debt fuelled dream become unsustainable.

New demographic and income data revealed this week supports the theory. It revealed the locations and customer groups most likely to see their disposal income squeezed, and as a result the property investments likely to face the strongest headwinds.

The result can be summarised as: beware the drinkers of expensive coffee, because self-consciously up-to-date young urbanites and students living in the big cities are the most likely to see their disposable income shrink.

CACI has calculated paycheck disposable income across the UK to look at the current gross household income and how this fluctuates by social group and locality.

CACI said the data showed that an increasing number of households in the country are living beyond their means.

The analysis is based on gross income after tax, energy, food, clothing and travel to work. The baseline is reviewed regularly to make sure it matches the current cost of living, which makes it possible to compare March 2022 data with today.

It shows that young city dwellers — and therefore the commercial real estate that depends on them — are the most likely to be hard-hit.

But it also confirms that Deano, whose progenitors imagined him to be living in the north east, is also suffering. The north east is the third-worst-hit region for a fall in disposal income, measured in cash terms.

Overall, today's disposable household income UK average is £18K against an average gross household income of £44,800. That is down 5% since March 2022.

The largest decline, by social group, was among students and young city dwellers, down 8% thanks to rising rents. Striving families were down 6%.

Generally, the lower income and younger groups were at most risk of living beyond their means.

The regions with the lowest cash-value disposal incomes were London (£14,500, 28% of gross income), Manchester and the north west (£16,400, 42% of gross income), the North East and Birmingham/West Midlands (£17,200, 42% of gross income). 

London was also the lowest by percent of gross income available for discretionary spending, followed by the east of England (39%) and the south east (40%).

“Our regional comparison shows that London stands out significantly; after taxes and necessary bills Londoners are keeping less of their money than anywhere else in the UK, at just 28% of income. The national average is 40%,” CACI Product Director Sue MacLure said.

“We’re also seeing the number of households with potentially negative disposable incomes — those that are paying out more than they’re getting in — rising, by as much as 38% since the start of the financial year. With low-income and younger groups increasingly being pushed to live beyond their means, this gives a real sense of the proportion of society that are under increased financial pressure, as the most exposed to rising housing and bills costs.”