Sunday Supplement 1 Jun 25 - Stamp comedown

"The downside of coming off junk was I knew I would need to mix with my friends again in a state of full consciousness." - Mark Renton, character from “Trainspotting”, the movie This week’s quote is a shoutout to the now-cheaper Stamp Duty regime that existed up until March 31st 2025. Ah, we remember it fondly. Before we go into this week full throttle - Rod Turner and I are running another workshop in July, on Thursday 3rd - Joint Ventures and Mergers and Acquisitions this time around, and it is sure to be a highly popular one - a whistle stop of the agenda: Market dynamics, JV opportunities, and optimal legal structuring for property businesses. Learn the pros and cons of limited companies, share classes, shareholder agreements, and sustainable JV models. Dive into capital structuring, comparing debt vs equity, managing risk, and understanding personal guarantees. Gain insight into property M&A, from due diligence to asset vs share purchases. Apply concepts through two in-depth case studies: acquiring an asset-backed property company and navigating a distressed business sale. Understand strategic disposals, company wind-ups, and how to negotiate under pressure while maximising value. Don’t miss the SUPER early bird tickets - now online and already selling like hotcakes at http://bit.ly/pbwseven This week was interesting in Trumpwatch land, too. US mortgage rates look to be heading back to 7% for new buyers, which isn’t great - and for the first time in 12 years, US home sellers outnumber buyers with 500k more homes listed than there are buyers, we are told. The price has still gone north - but below inflation, at a 1.8% annual increase for April. The Donald himself faced a court ruling that struck out many of his recent tariff moves on a legal basis (not including steel, aluminium and some car imports) - this was set aside by a superior court who ruled they would continue whilst the process rolls on. The timeframe isn’t long - dates of 5th June and 9th June are the keys. Mr T has of course confirmed he will go to the Supreme Court if he has to. There’s a concern around a class action against the US Government of course from those who have lost businesses/viability on the back of these tariffs if they are ruled unlawful. The key - as so often in law - appears to be in a few words. There’s an “unusual and extraordinary threat” criteria, which President Trump has used to refer to fentanyl trafficking and illegal immigration. The pushback is that congress should decide these tariffs. As usual, we continue to keep an eye on this developing situation. Worth noting that when the initial ruling came in, the US market futures jumped immediately by a significant amount - 500 points on the Dow. Checks and balances, all fine unless you are the one being checked and balanced, and he doesn’t like this at all. Onwards Whitsun Soldiers - the Real time property market. Watkin is BACK and landed a slobberknocker of an update to make up for last week! Week 20 is with us, and we saw 41,300 new listings on the market (and last week was 40,600) - listing season is well upon us at this point. That still sees listing 6% above last year at this point, and 9% higher than the pre-pandemic market. Toasty. My “10% more stock than a normal market” ready reckoner still works. 27,200 price reductions, 13.4% reduced each month, compared to last year’s 12.1% and the 5-year average of 10.6%. More stock, more reductions - absolutely and relatively. 26% more reductions than the 5 year average, if you take the difference between 13.4% and 10.6%. “25% more reduced properties than a normal market” also works as a ready reckoner. 28,900 homes sold subject to contract, JUST nosing ahead of the week before at 28,800. Better last week’s “best week since May 2022” which remains the yardstick. Healthy, and not suffering from stamp comedowns at this point, you’d argue. SSTCs are up 9% year on year and 17% on 2017-19, and nearly keeping pace with 2022 (which to this point was a very hot market indeed). Fall throughs are staying below the 7-year average, at 22.9% (last year 22.7%). The net sales are playing ball as well - 6% up on last year and 12% higher than 2017-19 - not quite at 2022 levels but the stamp cliff will have forced a few more transactions out of bed of course. I always give Chris a weekly shout out here because he’s more prolific than “just” this epic tome he releases weekly on the UK property market - he comes up with some great stats on a regular basis. Drop him a like, subscribe, and all the rest of it and some kind words for his content creation. If you are in the industry and want support in growing your business or to be a more effective communicator/be more in touch with your local market - that’s his core business - give him a shout. The article gets published on the Property Industry Eye website, and the video on his YouTube channel - @christopherwatkin

Here’s the Big Mac-ro for the week. A quiet one with the Bank holiday which leaves room for a few different stats. HMRC monthly property transactions commentary was one that caught the eye. Rightmove’s House Price Index doesn’t feature often but I promised more from them as data quality and output has improved. I’ll do that and Hometrack’s latest report side-by-side as one segment. SDLT receipts will be squeezed in with the HMRC data because they are of interest - also a rare opportunity to look at the “Economic activity and social change in the UK, real-time indicators: 30 May 2025” - released weekly by the ONS, a thrilling title I know but worth looking in on occasionally.

After that data-fest we will, of course, call back in on the gilts and swaps markets, but you knew that anyway. First of all, you know I hate headlines without context. LAST full month reported on, March 2025, saw 164,650 property transactions above 40k reported to HMRC. That was up 89% on March 2024 and up 80% on February 2025. Compare that to the commercial market for the same month - not directly comparable because commercial definitely is not equal to resi - but there were no stamp changes and that was up 7% YOY and 37% MOM. When seasonally adjusted, those figures don’t change dramatically so I’ll stick with the actual real numbers rather than seasonally adjusted ones (month-on-month is not a great comparison that way, but there we go). So - how about April’s numbers, released this week? You can guess. 55,970 - down 28% YOY and 66% MOM. A dramatic drop. Take both together? Still plenty more transactions than March - April 2024. Let’s see how May stacks up when it comes in, but you can tell from the past few weeks there’s plenty of sales being agreed and that hasn’t slowed down in the “new” stamp world. The SDLT results alongside are just fascinating. A huge drop, right? No! £1.486bn for the MONTH - a huge haul - and down only 0.8% on March’s bumper take with all those transactions. How? Well, March numbers of course avoided a lot of stamp one way or the other, but still, how can you do 66% fewer transactions in resi and nearly take the same amount? The ones that waited were the ones where the 2.5k saving made nearly no difference? There were also 21% fewer commercial transactions in April 2025 compared to March, so it wasn’t bumper commercial take! A few very high value SDLT transactions in London? We are talking £1.5bn, and given stamp on a £250m purchase would be the thick end of £35m for a non-resident, it would take a fair few of them to keep the needle nearly where it was in March. Mind-blowing! The noise was indeed just as good as those loading up on BTL or second homes before the “2016 Cliff” - and not far off the Covid comedown, which came in a few blips if you recall as there was a stay of execution not long after people had been rushing to complete anyway. I’ve used the 20 years worth of transaction data as this week’s image because it tells multiple stories, and you will be able to explain them all (alongside my stamp commentary there) nice and easily. Having not personally seen much fallout, the scale of this does surprise me. The drop (or lack of it) in SDLT receipts has me scratching my head even more. Perhaps we need to wait another month as some of March’s have been booked in April? The ONS or HMRC don’t go into that level of detail in their thin reports, they are just data series (when it comes to monthly SDLT reports) - there is no commentary, so I am left speculating. House price indices - Rightmove first. Listing prices up 0.6% - “smaller than usual”, they remark. Asking prices up only 1.2% year-on-year blamed on “decade high supply of homes” - will not be news to regular readers. Sales agreed is 5% ahead of this time last year - Mr Watkin would respectfully disagree, and he has all the portal data, not just Rightmove’s - but he wouldn’t disagree much. The “asking price record” is gone again, this month, at £379,517. This is so very far ahead of ONS/Halifax/Nationwide numbers (all still just about starting with a “£2”) that it can only speak to the unrealistic nature of many listings, which goes hand in hand with overvaluing that is still completely rife amongst unscrupulous estate agents, just to get instructions. Rightmove points to a bounceback from a dull April, dull thanks to the SDLT changes of course - they speak to “early signs” and have demand YTD 3% up on 2024’s numbers. Rightmove frames the current situation nicely; “spoiled-for-choice buyers are still being tempted by the right property at the right price”. They have 14% more listings than this time last year, and advise that “caution is needed on price expectations”. They also make headlines of the fact that the latest mortgage tracker sees 2-year products down to 3.72% best price, it was 4.75% last year (as the yield curve has normalised, the front end has been the big beneficiary, as I have discussed a few times). By sector Rightmove have FTBs with an annual change of 0.7%, second-steppers up 1.6% year on year, and the top of the ladder up 1.5% - but, remember, these are asking prices. The commentary also includes a nod to the fact that this is the lowest May increase for 9 years - which, interestingly, means “since May 2016”, where again there had been a big stamp duty change coming in on 1st April. When they go regional, outperformance is noted in the North West, with asking prices up 3.9% year-on-year; The South-East is the lowest with a year-on-year change of only 0.6%. The affordability graph that rightmove uses (comparing a single and a couple) is more affordable than it has been since 2015 (or before). Mortgage payments alone are still £200 a month more expensive than average rent though, according to Rightmove. (I know, I know, insurance, maintenance, compliance etc is not included in “mortgage payments”, I live on that high horse). How about Hometrack’s May edition? Owned by Zoopla of course - who are seeking a buyer, if you hadn’t seen - bought for £2.2bn (ZPG) - up for sale for £500m - but it isn’t clear if that’s just Zoopla, Zoopla and Hometrack, or other sites as well (Primelocation) - Uswitch was also included in the original deal. ZPG lost HUGE money in 2022 - £714.6m, and also lost money in 2023 so at a last declared profit of £18.7m for Zoopla itself in 2023 - perhaps they are hoping that Co-Star will buy it to consolidate their investment in On the Market - I don’t know! Anyway - the index! +1.6% on house prices to April 2025, annually, they say. 6% more sales agreed and 97% of asking price agreed (Zoopla data here, of course). Again though they note the highest level of sales in May for 4 years (2021 was roasting hot of course) - and they have 13% more stock on the market compared to last year. Northern England is the strongest - house price inflation is “stable”, and the North West is 3% up compared to price inflation of 1% or less in the South. “Most sellers are also buyers” - which doesn’t tell us what percentage is ex-rental stock, something that Zoopla were talking about in 2024 that they don’t seem to be in 2025. Sales agreed have increased faster in more affordable areas - outside of the South of England, basically. When you look at Zoopla stock, stock in the North West is only up 3% on last year, and 5% in Scotland. This has seen prices up 3% across the North West and 2.9% up in Scotland, according to the Hometrack Report. All the price growth is concentrated, by city, in cities outside of the South - not one makes the top 10. Indeed it is a tale of Bs as it was last time we looked at this report: Belfast, Blackburn, Birkenhead, Barnsley, Bradford and Bolton are 5 of the top 8 including 1st and 2nd. So - some contrasting data, but largely they are on the same page. Rises way below what the ONS, Halifax and Nationwide are saying - but the overvaluation tricks are just hiding what really happens, and the “percentage of asking price” metric might be a better one to track than what they think on pricing. The regional variation is clear, and is not showing any signs of slowing down just yet - the North still has the gauntlet, with the Midlands running a close second. How about the real-time economic activity report, then? It contains a whole host of interesting data. Shopping centre footfall? Up 1% compared to a year ago - not going to solve retailers woes on its own. Debit card spending was up 10% compared to a year ago (don’t read too much into this, this is after all a week-long-period and weather would be a huge factor aside from anything else!). 13% of trading businesses with 10+ staff talked of an impact from the tariffs (a new question inserted of course. Electricity wholesale prices were 22% lower when compared with the same week in 2024 (although how much difference would solar make……) - gas was 6% up year-on-year. There were 5% more flights than the equivalent week in 2024, and 5% fewer ships into UK ports compared to the same week last year. EPCs were down 6% for new dwellings but 30% up for existing dwellings - speaking of the craze of putting more houses on the market, it seems, but also being realistic about new builds or the lack of them! Moving on to the medium term analysis, just picking out the noticeable ones: job adverts - we know about the decline, 41.4% fewer adverts than on 1st January 2023. Redundancies don’t look out of line with what’s already happened in 2023 and 2024. Company incorporations have come back from a low over the past couple of months. Dissolutions look relatively normal, or low, if anything. Gas is down 50.2% on its price on 1st Jan 2023 - and electricity is down 28.2% as well, for more context. Automotive fuel is down 18.3% since then also. Renter affordability (from dataloft) has the percentage of gross income spent on rent at 29.6% on average in April 2025 - compared to 26.4% in January 2023. This is an improvement from September 2024 though when it was 30%. Flights look healthy - over the period in question, they are up 19.3%. On rental affordability, this was at 25%-26% and steady before the pandemic, for at least a year. It really soared in 2024 and found a blow-off top at that 30% when it wasn’t much above 27% at the end of 2023, and looks to have settled more around 29%, if anything it looks like there might be more downward pressure in coming months (but remember, many households have just had a pay rise, and this is a percentage; so that doesn’t necessarily mean rents coming down). The bull run is over, as I’ve said a number of times over past months.

The real time economy out of our way - how about the real time debt rates? A short week, with an open on Tuesday for the 5 year gilt yield at 4.142%, no real UK based news of substance, some volatility on Thursday with a run to try to best 4.25%, but quickly clipped back, to close the week at 4.142%. The first time it hasn’t even moved by 1/1000th of a basis point beginning to end - nor should it, because no real data of note was released.

Thursday’s close was 4.13%, and the swap close was 3.866%; the discount trimmed quite considerably to 26.4 basis points. Hmmmm. Beginning of a trend? More demand in the mortgage market? I won’t draw any conclusions over one week, especially a more lightly traded short week - but still, I’ll be keeping the beady eyes on it! A move in the wrong direction there. Deep dive time, then. Something from both sides of the fence - as usual. So I couldn’t resist Shelter’s “Affordable rent is not affordable” paper - this was being trotted out at the Labour Party Conference when I was there last year, where I tried to tell anyone who would listen that “also, temporary accommodation is not temporary” (deaf ears were offered up). To temper that somewhat, Savills have also released their completions forecast for England out to 2028-29. Guess what - the forecast is egg firmly on face, and we will need a few dozen boxes at these numbers. Affordable rent, then. We’ve discussed before. Definitionally this can be tricky, because people get lost between social rents (genuinely cheap) and affordable rents. Definitions - “up to 80% of the local market rent including any service charges” - keeping it simple, think of social rents as around 50% of market rents. So if one place is at 80% and the other is at 50%, the 80% place is actually 60% more expensive than the social rent. (30% on top of 50% is a 60% premium). Shelter - well I think you know where they are going to land on this issue. Nevertheless - here are their conclusions and then a look at the methodology. In 42% of areas in England, a one bed affordable rent home is actually unaffordable to an individual on low pay, using the ONS definition of affordability. So there. A one bed social rent home is affordable in 98% of England by contrast. In Lewes, 55% of wage is taken up by an affordable one bed - compared to 27% for social rent (so affordable is more than double social rent there, in that case). Luton and Barking and Dagenham aren’t far off those figures. The ONS definition - 30% or less of the gross income must be spent on rent. Shelter then took someone on the 25th percentile of pay, and looked at where that person would sit compared to affordable and social rents. A very important qualifier here, with an immediate excuse (or reason). Income from benefits was not included in the calculations. This almost renders the exercise pointless - but their reasoning is “affordable housing ought to be affordable to an individual in work without needing government support via benefits”. I wonder if they’d be similarly inclined if those supports were just taken away - because any such individual at the 25th percentile would very clearly qualify for a housing element contribution to their universal credit, of course. There’s a longer-form explanation of affordable rents (to include intermediate rents, shared ownership, and the likes) - but we get to the conclusion anyway that “affordable rent isn’t affordable”. Well, not if we cook the books it isn’t. It’s just a case of building an alternative reality to fit an argument and then produce statistics like “55% can’t afford a 1 bed” - if we are using the ONS definitions, we should use them across the board, no? Household income INCLUDES benefits (as defined by the ONS) so this is just a case of cherry picking which bits suit an argument and which don’t. Weak would be a favourable writeup of this methodology. I’m sure affordable rent in many places actually ISN’T affordable, but sadly we would need to go back to the drawing board to actually establish how unaffordable it is. If rents are up 25% in 4 years (perhaps a shade shorter), then what was market rent 4 years ago is now “affordable” under the 80% definition. That’s a short period of time to go from market to affordable. Sure, in that time the minimum wage is up 37%, although after tax and national insurance your “hold” would only be up 26.64% (removing 28% for basic rate tax plus employees national insurance). Utilities are up more like 50%. Council tax is up 18.6%. Costs are pretty much where they were, but the ideological positioning of rent and the “horror” that it might go up in price mean that a sensible discussion around these parameters cannot take place (according to some who should be involved in the debate, anyway). Having shot their own credibility in the foot, Shelter go on to discuss the fact that “some social landlords with affordable rent schemes need salaries between £35k and £60k”. The article citing this was on the BBC website on 1st August 2023. This was in London only, and the detail (in the article) was that 28 out of 40 listings had no minimum income requirement. 11 did and they were actually between £30k and £60k, the twelfth one had an income requirement of £27,750. There is a fantastic graph in that BBC article that REALLY highlights the problem far better than this Shelter paper does, from what is now the MHCLG (since we don’t use the term “levelling up” any more, for whatever reason. I’ve stuck with the stamp duty graph for this week’s image but the original BBC article is here for those that want to look: https://www.bbc.co.uk/news/uk-66255727 . There are a number of counters - simply that people are being affordability scored is the obvious one; it also uses one example of a single person under-35 without qualifying that the housing allowance works differently for under-35s who are single, and that’s a big omission if trying to do an impartial job. So - why affordable not social, Shelter go on to ask. Well, their short answer is correct - affordable rents are higher, so they are “cheaper and easier to build” - well, that bit is a stretch. What they REALLY should say is that many schemes that stack up under affordable rents simply don’t work on social rents and are not financially viable to build - but that’s not how they want to frame it. Their long form answer is better - grants have been reduced making social rent unviable. They put no quantum around this - 2010 and the dawn of austerity was the “big day”, when funding for new affordable homes (as defined then) was reduced by 63%. 75% of building costs were covered in 1990, in recent years this has decayed to 12%. Not sure why they DON’T use these, as they are pretty powerful! There is a much broader conversation around the national budget, of course, that needs to be had to bring all of this into context. The average grant per unit in the 2008-11 affordable housing programme was £60k, and it became £20k in the 2011-15 programme. Shelter do cite the last decade Governmental figures that show 14% of all affordable homes delivered were for social rent, compared to 54% for affordable rent. Between 01/02 and 10/11, 60% of affordable homes were for social rent. The conclusion here from Shelter - we need more social rent homes, with 1.3m households on the waiting list, and temporary accommodation is growing fast. Shelter claim two-thirds of working renters (nearly) are “struggling or behind on rent”. This is from a YouGov poll that Shelter commissioned, and in the article they cite (from the Guardian) - the figures actually show 3 per cent behind on rent (even written in words rather than using the number, the old “auction contract” trick!) - compared to 23% constantly struggling and 40% sometimes struggling. A different story when framed like that, I think you’d agree. This release shows just why Shelter inspires so much vitriol, I believe, from the Landlord community. It’s little short of propaganda, and has no regard for fair and accurate reporting. It’s such a shame, because the cause IS noble, but the “say whatever is needed to get there” methodology means that any well-meaning but sensible and constrained politician would come to a similar conclusion when presented with this data. The report relies on people not digging down even one level - which I appreciate might well get past many in the world of content overload, and the rest - but it just isn’t robust in any way, shape or form. The situation is bad. No doubt. I talked some months back about the excellent community rent model which comes from Darren Rodwell, former council leader at Barking and Dagenham, who built 8% of all of England’s council homes in 2023/24, and 20% of all London’s social/affordable homes over a 5 year period. I have no concept of why Shelter and others do not champion this model, which could REALLY help - I accept that they refuse to face the fiscal reality of social rents just not stacking up, but construction costs up 20% (I can’t believe it is only 20%) for an affordable home between 2020 and 2024 (that figure was from UK Finance in 2024) make things 20% harder, if rents don’t move up at least 20% to compensate. I’ll just remind you of the figure that I heard from a large housing association - 80% of rents are spent on maintenance and management. Yes, EIGHTY per cent. That’s from an HA with over 100,000 units. They have debt/leverage that they’ve used to build units! So, there’s no other money apart from grant money. Those who understand Westminster or even local politics far better than I constantly bemoan just how hard it is to access grant money - I know from the relatively minor involvement that I’ve had that the local authority employs people to help with grant applications, such is the complexity of it all. I can’t imagine many things more inefficient than this - no reflection on the local authority workers employed to do that job!

Enough. The other side of the fence, and this inspired a question I asked on LinkedIn this week. Savills released their housing completions forecast for England last week. Their headline number - 840,000 completions in the five years to 2028/29 (ending 31st March 2029). Around about election time, if Labour need or feel the need to hang on. Their target was 1.5m, which you won’t have forgotten. The first 18-24 months simply had nothing to do with them, they will tell you - of course, had they diverted significant resources to building social/affordable, and I do mean significant - then they could have changed this. They’d have been much better off to talk about how many social or affordable homes were built, though.

What are the symptoms, and the root causes? 3 years of falling planning consents. Planning reform takes time to filter through. Savills also point to “subdued demand for new homes” - this is the classic argument against the Starmer recent (ill-educated) position around land banking. Builders will build to the level of demand, because they are private profit-making organisations. I’m not sure they should apologise for this - if this isn’t wanted, then the only reasonable solution would be to make the state one of the largest housebuilders (as it was decades ago). Savills point to a potential removal of the demand barrier via buyer support schemes (help to buy, for example) or a large increase in grant funding for affordable housing (Labour must know this is needed but the Treasury has simply blocked it, that can be the only explanation) - but then there is time needed for workforces and supply chains to expand. The current system, according to Savills, could only expand to 1.2m every 5 years at full capacity, based on past precedents. I’m not sure about the past precedents here. I don’t remember a time, ever, under any government where the liberalisation of planning has been so near to the front of the political agenda. I’ve said from the start that this is only stage one of at least four problems, but I think this is unprecedented. There are contrary moves going on, of course - more regulations, solar panels needed on new homes, and the likes - but there’s room for unprecedented to occur. However, I don’t see that happening without significant grant funding for the affordable side of things - and the way the sums are currently done is just not conducive to that happening. There would have to be a change at the top level in how the benefit of an affordable home is calculated to make it “work” - the second order consequences, and the likes - and without a “flex rent” scheme as it is sometimes known/community rent model as discussed (think - when you can afford more, you pay more, to the public purse) - I don’t see any sweeping changes. The brutal reality is that the Government is currently struggling to keep up with previous commitments to affordable housing because of anaemic growth and protected budgets in other areas. Savills then gets down into the details. Without a help-to-buy style scheme, they say that new homes sales cap out at 100k per year. That’s the demand (taking into account affordability constraints), and that’s about 10% of all housing transactions (1.2m is more “normal” as discussed recently, but there’s a trend going slowly downwards over time as SDLT increases, alongside anything else). Build to rent starts are down 59% - 2023’s falling market significantly derailed the train which takes 7 years from concept to reality to produce units. The Savills expectation is that 2024’s BTR deliveries won’t be surpassed by the end of this Government. They correctly identify that grant-funded affordable housing is the best way to deliver more units more quickly. Ideologically, it’s also the units that a Labour government wants to deliver. It’s ALSO what the country actually needs, regardless of any ideology, according to my analysis. This needs funding for affordable homes, to enable housing associations to rebuild financial capacity (much more difficult than it sounds, in the normalisation era for interest rates, but raising rents is one way of course) - and then Savills mention needing to ensure demand. There’s no work to be done here, unless we are talking about ensuring we don’t get affordable homes in the wrong geography. The supply chain constraints - the maximum growth in the level of completions year-on-year has been just over 15%. This precedent would struggle not to hold without disruptive technology or a concerted effort to import skilled labour (and given where the Overton window currently sits on migration, this seems politically very difficult even if the other chess pieces were in place). I don’t see the funding issue being solved in any short order. EPC data says 180,700 new homes were completed in 2024/25, Savills tell us. We have two more years of “necessary” falls in completions, thanks to planning applications already submitted - which of course takes us to 2027/28 before even the first sniff of an “up” year. You won’t need a calculator to know that puts the Government well out of time. Savills are forecasting 160k completions in 2025/26, the lowest since 2014/15 (which of course was a number born out of the embers of the Great Financial Crisis). Build to rent starts went from 25,700 in the year to October 2022 to 10,600 in the year to March 2025 - Truss as always takes her fair share of the blame, although the interest rates were going up anyway (just at a much more manageable and slower pace). There’s a point here around how quickly interest rates come down (although not to be confused with the base rate of interest, it is more the longer-term debt price). Housing association starts were down 88% in the year to March 2024. The building safety act, largely, is the reason given for this (they don’t say it outright, but that’s the implication). How do they rebuild their balance sheets? Inflation-linked rent increases (which has already been put in place by the Chancellor), “rent convergence” - their suggestion to bring rents into line with rises at CPI plus 1% plus or minus £2, for example - to try and get some rents that have become disparate, back into line. The benefit here is the planning of future cash flows, aside from anything else. The Savills language is around “harmonizing rents”, I’m not sure Shelter would be quite so understanding! The third leg is funding to resolve “issues with existing homes” - presumably retrofit for EPC issues, plus cladding, alongside anything else. S106 is contributing around 20k houses per year in the forecast, compared to around 27k per year in the last 5. This is based on them being a percentage (18%) of market completions. Interesting to know that number - 18%. We have the spending review in the next couple of weeks, which should say quite a lot more about affordable housing. The point to take home is that really, this is the only part that is hard to predict, and the only part that the Government can REALISTICALLY control in a meaningful way (without bringing in a help-to-buy type scheme). The forecast from Savills just assumes the same level of delivery compared to the past 5 years. This would be fairly criminal to many Labour supporters if they could not deliver more than the Tories in a period that included a pandemic - so let’s see. There’s been no noises that I’ve heard from Reeves thus far that this is a real priority for the Treasury, although the manifesto commitment was “the largest increase in social and affordable housebuilding in a generation” (although they talked about “delivering more homes from existing funding” - NOT providing more). There’s also the tightening of the right to buy to protect the existing stock, which has already been done. The next part is “empowering local authorities” - I do wonder whether the inevitable Reform takeover of many councils, and very possibly Wales within the next 12 months, will change the overall attitude towards devolution, because this simply was not at all planned for by the establishment (whether they be Red or Blue). There’s also a large boulder to trip over here. You can’t “deliver more homes from existing funding” (manifesto) AND have a preference for social rented homes, because they are much more grant intensive. The only solution here is money, and money isn’t on the table (let’s not forget the £5bn pledged in October, but “only” £500m of that was reserved for the Affordable Homes Programme). In order to produce a more robust piece of work, Savills then examined what would be needed to exceed the forecast. Demand-side measures (e.g. help to buy) could be introduced to assure housebuilders of an exit. That could be worth 40,000 completions a year, based on the decade to March 2023. That’s where the Housebuilders lobby is largely focusing its efforts. Persimmon have their own variant, with a 15% interest-free loan from the builder (but high rates on the overall mortgage product, of course). Any interest rate will look high compared to rates from the 2013-23 era though, in fairness. Whilst doing some more research around this report, in order to do a fair job myself, I did come across a nugget around how much was injected (or at least committed) back in 2017. The £44bn number came up, and I didn’t remember it with much clarity, so I thought I’d go back and educate myself. So - in the Autumn 2017 budget a comprehensive strategy was unveiled, committing £44bn over 5 years to address housing supply. (Do you remember “Spreadsheet Phil”, Philip Hammond? Not much, I’d bet). This was, at the time, going to get housebuilding to 300k per year by the mid-2020s (oops). That’s also 1.5m in 5 years, you will notice. Here’s how it broke down: £1.5bn to a home building fund, to lend to SMEs, custom builders and those using modern methods of construction £2.7bn to boost the housing infrastructure fund, administered by Homes England £1.1bn for a Land Assembly fund, to help assemble fragmented land parcels £8bn for financial guarantees to support private sector housebuilding, including BTR and SME builders (trickery here as most of this would not have been “spent” of course) £10bn to help to buy equity loans (more trickery as again the payback is upon sale, after 25 years, or when the mortgage is paid - based on the market value at the time of sale/repayment/mortgage being paid off - but that’s clever, because the Government rode the wave of the housing market this way). £2bn to affordable housing £1bn to increase how much local authorities could borrow to build council housing I left out anything under £1bn, but it is clear that a decent slug of the numbers above, £18bn of the £26.3bn, were mostly puffery. What was also included was a proposal for 5 new garden towns. How are we doing nearly 8 years later? One was shelved because it was too near an Atomic Weapons Establishment’s emergency planning zone, one is in Hemel but still in planning, another is still under “consideration”, a fourth is also still in planning, and the fifth has also - guess what - not started construction yet. 7.75 years later. You can see that most of what goes on is recycled, regardless of the colour of the Government, and that - in the most frustrating way - Labour are often RIGHT with a lot of their high level statements, “regulation gets in the way”, “we need growth”, but then the resultant policy doesn’t end up backing it up at all, it’s just a little tweak here and there. Back to Savills and the report. Even with a functioning help to buy, that delivered the same expansion as the original scheme at its peak, seeing completions grow at 15.7% per year each year, only 1.2m completions would be achieved. They see this as the absolute ceiling, without considering £15bn (or something really significant) being pumped into affordable housing. To get there just via grant funding, Savills see that number as more like £40bn, on top of £17bn already needed to maintain the delivery of 30,000 homes per year as per their forecast. I have seen industry insiders cite this as more like £100bn+, but a large amount depends on the rent model used and that conflict that I’ve already identified - more affordable, or fewer social (but more than today)? The Government sees funding at around £111,000 per home - again, insiders suggest this is more like £150,000 per home and more like £200k+ in London. So - their conclusion - 255,000 per year is our absolute maximum capacity to be reached during this parliament, a run-rate of 1.25m homes by the time the election comes. Completely best-case scenario. They’ve done a very good job of steel-manning the case for building more - and it shows it is possible. However, with that central forecast at 840,000 new homes and last year’s numbers basically known, and the next 2 years’ numbers basically known - it is very hard to imagine even 1m homes being delivered. The housing crisis as framed - emergency according to Shelter - challenge according to Savills - is nowhere near coming to an end anytime soon, and Labour are highly likely to have missed and to deliver fewer homes than any 5-year period since 2011/12 to 2015/16 (post-crash, of course) - the last time it was that weak was 1999/00 to 2003/04, for no good reason I can think of other than a lower net population growth of around 280k per year. Delivering the same number of units with an observed and expected net population growth of around 340k-400k per year in that timeframe puts us further behind the curve, rather than anywhere near getting in front of this. My conclusion - as usual, the situation looks bleak - if you are reading this hoping to save and buy for your first house, my only message would be - you can do it! It will take significant sacrifice and is a long journey, not a short path to gratification - but don’t let the macro situation get you down. From a zoomed-out viewpoint, it will be hard yards for the populace as a whole and the situation is unlikely to get better, even before we consider even further regulations, build costs and compliance costs. As we’ve come to the end once more, remember to book your tickets for Thursday 3rd July for the next Property Business Workshop too, on Joint Ventures and Mergers & Acquisitions - another fabulous day of learning and discussion is guaranteed! Get those SUPER EARLY BIRD tickets here: http://bit.ly/pbwseven Above all - please remember to Keep Calm, ALWAYS listen to or read the Supplement, and Carry On; there will be opportunities abound this year and towards 2030 - the risks around at this time, while they feel significant (the geopolitical ones) are far less meaningful to the UK housing market than they have been for several years - of that I have no doubt. Good luck!

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