Sunday Supplement 15 Jun 25 - The Spending Review

“Use a picture. It’s worth a thousand words.” - Arthur Brisbane, newspaper editor This week’s quote pertains directly to the deep dive and the diagram I’ve shared this week about the impact of the 2024 Autumn Budget. 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 EARLY BIRD tickets - 10% discount - they are only available for another week or so and are selling like hotcakes at http://bit.ly/pbwseven More developments in Trumpwatch land this week too. He got busy with the National Guard and Marines in California, and the legal battle continued with an overrule and then an overrule to the overrule. Executive orders were signed to repeal the “gas-powered” (petrol/diesel to you and I, or “ICE cars” as they are termed these days) ban in California on sales from 2035. More legal action was triggered on the back of that. Then there was the financial disclosure of $600m of income - including $57m from crypto token sales - at the very best “blending” business and politics….. Tariff-wise, the appeal for the reversal of the “fentanyl” and reciprocal tariffs (think China/Mexico) is set to be heard on July 31st, which means they stay in place for the moment. July 9th is d-day for the “delayed” tariffs by which point trade negotiations were supposed to be concluded - of course, there could just be a further delay if more time is needed (much of the commentary suggests extra time is needed). Mr Trump also seized the nettle and offered a “second chance” to Iran for a nuclear agreement, based on the events in the middle east this week. He’s also on his 80th journey around the sun, lest we forget, and it is hard to after a “strongman” military celebration of his birthday on 14th. Ah well, it only cost a few tens of millions - “efficient”. Let’s go to the real time property market. Chris Watkin delivers - Week 22 is in the can, and we are back to normal weeks after a shortened Bank Holiday week report last week. Listings back to 39.3k on that basis, but still 6% higher than 2024 YTD and 8% higher than the pre-pandemic market. My “10% more stock than a normal market” ready reckoner is still there or thereabouts. 27,900 price reductions, 14% reduced last month now, compared to last year’s 12.1% and the 5-year average of 10.6%. More stock, more reductions - absolutely and relatively. 32% more reductions than the 5 year average, if you take the difference between 14% and 10.6%. “25% more reduced properties than a normal market” also works as a ready reckoner. One in seven being reduced each month! 28.6k homes sold subject to contract. Healthy is still a fair word. SSTCs are up 8% year on year and 16% on 2017-19, and still nearly keeping pace with 2022 (which to this point was a very hot market indeed). We went into June with 756,675 homes on the market - as the market got stickier before the pandemic that number was c. 660k, a sellers’ market is more likely to be under 600k. At the end of May 2024, 694k were on the market. It’s a lumpy trend upwards in only May and with this amount of stock on the market, it will be continually hard for prices to surge forward in the coming months - the “flat” feeling will likely manifest in a steady market without much excitement as we head into “summer proper”. The first month which sees fewer on the market that isn’t November or December would be a tell that the glut of stock - provided at least in part by exiting landlords, the “never spoken about” truth of this current market - has reached its peak, but there’s no surefire sign that we are there yet. There was a net increase in stock of over 40,000 homes on the market in May. May 2018 was similar - the normal number looks more like 10-15k more on a “typical” year. Nothing to read into that just yet, but just how much stock can the market cope with before it turns into a buyers’ market? The 756k number is the highest for many years, and when buyers don’t match sellers, you know what has to give…..price. Am I calling a drop in pricing here? No, but I’m calling not much of an increase - not even keeping up with wages and inflation. I’d expect flat output from Halifax and Nationwide over the coming months. Fall throughs are staying below the 7-year average, at 23.5% (last week 21.7%). All relatively normal “noise”. The net sales are still playing ball - 6% up on last year and 11.2% 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, and as the year progresses then in the absence of any more shocks, things will likely catch up because transactions were significantly “disturbed” by the 2022 budget and the bond markets, of course, in comparison. 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

Time to catch the Macrowaves. A chunky week. The (easing) labour market report. “Growth” for Awful April. The RICS house price balance has to be in. After that I concentrate on the gilts and swaps markets, as will remain a mainstay for coming months and years.

Reporting on and forecasting April 2025 was both easy and difficult. No-one credible suggested it would be anything other than a bad month as minimum wage rises kicked in, alongside massive cost increases in National Insurance for businesses. Anything remotely “people-heavy” suffered. Payrolled employees were down 55k in April, and down 115k on the year. Let’s remember when we look at this stat that many companies have a much bigger incentive to move people off their payrolls and look at self-employed options, and many employees may be forced into those spots if they have lost their jobs - so that stat alone needs to be read with a dose of “sceptical salt”. The early May estimates are equal carnage - there are often big revisions here but we cannot ignore the early estimate of 109k fewer payrolled employees for May. We will find out the number next month but at this point you’d bet on the unemployment figure - now 4.6% - becoming 4.7%. There is a cautionary note (a special one because of the timing of the data extract) so, to repeat, let’s wait for next month! The most important stat line in the whole report is the “big picture” which stands at 75.1% employed, 4.6% unemployed, 21.3% inactive. That 21.3% has come down significantly in the past quarter and year - down 0.2% in the past quarter, down a full percent on the year, but we are still another full percent ahead of where this rate was before the pandemic - and the economy needs to get back there and better. It’s the most important figure of all - arguably, better to be unemployed than inactive (certainly when we are at levels of under 6% or so - at higher rates of unemployment there are likely larger issues to solve in the economy, but we are nowhere near any of that, happily). It could be that you are in training, of course, which could be preferable - but the majority of the inactivity is better seeking work than not seeking work, as the numbers shake down. So - the terrible headlines were not THAT terrible. Or, as I often say - the fact that we started from such a low base gave “room” for these Labour policies increasing the cost of workers by such a large amount. That’s not the same as the “economic backfire” argument which we will explore in the growth section! Unemployment, in isolation, and having a smaller but more productive workforce, is not the worst in the world at the macro level - it’s just not great if you’ve lost your job and that job isn’t being replaced/is being outsourced/has been “AI’d” out. Vacancies fell for the 35th rolling quarter on the spin (35-month period, but calculated on the last 3 months basically). The fall was nothing short of huge. 63k vacancies culled, 8% off the top. There are now 59k fewer job vacancies than in January 2020. There are recruitment freezes and there’s an unwillingness to replace people who have left. For context - the UK working age population in January 2020 was c. 42 million. In Q1 2025 it was 43.2 million or thereabouts (up around 3%). More people chasing fewer vacancies suggests an employers’ market by comparison, and I think we can expect that to play out over coming months and years as it stands. Unemployment matched economists’ expectations for the month. Average earnings came in a little below, about 0.2% below expectations (but still at low 5%s, 5.2% ex bonus, 5.3% including bonus, so 5.25% is a fair proxy). It also breaks back as 5.6% in the public sector and 5.1% in the private sector, although there was an imbalance the other way during the pandemic of course. This breakdown was not in the ONS reports a year ago, unfortunately. Adjusted for CPIH, the preference of the ONS, makes this a real terms pay rise of 1.4%-1.5%. Reasonable is the word to use there. Public sector employment is up 35k in the past year, and there were 47k working days lost to labour disputes in April 2025 (!). In April 2024 this number was 17k, but there were many months with this figure around the 100k mark and higher as there were many post-pandemic pay disputes. So - another way of looking at the figures would be to say that lower inactivity is driving the unemployment - since one year ago, the 1% that have become economically active sees unemployment up 0.2% and employment up 0.8%. That 80/20 split would be most welcomed if we saw another 1% come back from inactivity to activity, and that would take us back to the pre-pandemic level of inactivity which would be a big day. The UK has been very very slow in this compared to other western nations - VERY slow. The rest of the G7 were back here in either 2021 or 2022, which suggests a specific policy problem (which I believe was identified but ignored by the Tories, and has been identified and tweaked by Labour rather than fixed - sickness benefits). To be 3+ years away and to need another year is incredibly expensive and damaging to the economy. The ratio before the pandemic, Q1 2020, for context - 76.6% employed, 3.9% unemployed, 20.2% inactive. This adds up to nowhere near 100 (and don’t ask me why, but the employed are counted at whatever age even though the working age population starts at 65 - don’t get me started, it’s a joke) - so if we instead worked back from inactive plus unemployed at that point, we’d get to 24.1% unemployed/inactive and 75.9% employed. Today we’d have 4.6% unemployed and 21.3% inactive, and then have 74.1% employed and 25.9% unemployed/inactive (in both of those cases, I’ve just subtracted the unemployed and inactive figures from 100%). That’s actually a 180 basis point difference, and shows just how terribly anaemic the UK economy has been since the pandemic. I’d lay the politics to one side here. Both administrations have been poor, and no wonder the person “on the street” isn’t feeling any benefit - the time taken to get back to “par” is frankly ridiculous, and unemployment/inactivity won’t be back down below the 25% level during this administration I don’t think - primarily because of massively increased costs and with further labour market regulations set to come. It would take a real benefit squeeze to push us back to where we were, after the state expanded so very much during the pandemic (and that expansion is set to continue, in real terms, at 1.2% per year on day-to-day spending). More on that in the deep dive.

Hoping for better figures in May, but the expectation will be the same or worse based on the predictions. We know May has been milder from the PMIs, but companies are still reporting shedding jobs, so the difference between 4.6% and 4.7% will be in the rounding, I’d suggest.

Onwards to growth then. Right, that’s the end of that section. Only kidding. The worst month since the pandemic is in the can and confirmed, with Awful April returning -0.3% GDP growth. I had pointed out some time ago that NIESR’s forecast for April being a positive month was pretty crackers, and so it played out - models can’t capture step changes like the national insurance increase, because they have no real precedent to work from and they weight near-time data far too strongly. There was also the tariff shock to deal with of course, which damaged exports (and indeed many exports had been front-loaded into Q1, likely falsely inflating those figures as well). The -0.3% for April has been absorbed by the good couple of months before that so the rolling 3-month figure is still 0.7% - way above expectations, mostly because of the February anomaly. As usual I can’t make these add up - +0.5% Feb, +0.2% March, -0.3% April - you tell me how that gets to +0.7%, but there we go. We might have to start calling them the ON-mess until someone steps up to the plate to sort the organisation out. Likewise - January (0% growth) drops out, April (-0.3%) drops in, but the rolling figure stays at 0.7% which is where it was for Q1. Go figure (if you pardon the pun). Services contracted 0.4% on the month, the same 0.4% that they increased in March. Production was down 0.6% but construction was up 0.9%. What did badly in April? Perhaps not what you’d expect. Professional, scientific and technical activities primarily in services, alongside information and communication - mostly driven, according to the ONS, by the front-loading of property transactions in March thanks to the Stamp Duty deadline! (and the impact on the legal profession). Stamp has far-reaching consequences! The drivers forward in construction were new infrastructure work alongside private housing repair and maintenance. More repair less new is the current story, as is borne out in the figures. So the ONS puts the blame on SDLT and tariffs, mentioning the NI increases just in passing at the end. We have to make our own minds up on that truth, it would seem. Either way - lump March and April together to make up for the SDLT if you like and we still see contraction - and exports should improve when we see the May figures since that part of the tariff saga was positive with the hiatus (which likely saw many more exports ramp up again, although inventories were built in Q1 as discussed when companies were speculating on “Liberation day”. So following this logic through, since the housing market largely looked to be repaired, although the HMRC transaction figures aren’t out until 27th June (for May). So - as so often - it isn’t as simple as it looks. However, the 0.7% growth figure still doesn’t look “real” or reflective to me. I suspect it will play out in dragging the rest of this year’s figures downwards, not negative, but flat. The “economic backfire” argument I referred to is quite simple - by raising national insurance by quite so much, the £25bn raised (of which £5bn was from the pot anyway, as that was the public sector cost, and another £4bn was foregone corporation tax) - so perhaps I should say the £16bn raised - is about equivalent to 1.7% of economic growth. So - if there was an argument that since the announcement of the budget, economic growth was 1.7% lower than expected - currently revisions downwards since the budget are about 1% to 1.25% down depending on which figures you follow, and they were revised forecasts of course - then the entire project would have raised nothing at all. This is actually fairly typical in an advanced system - there are no free lunches and everything is a tradeoff. The real raise is in the low billions IF you can draw a direct comparison between the NI announcement and the lack of growth (and some of it will play out over years, because some of it just discouraged investment - which is very hard to monitor). There’s also even more that we aren’t in control of - for example, tariffs, or Mr Trump driving investment money OUT of the United States to a more stable regime, the flight from the dollar is fairly unprecedented stuff and has plenty of time left to play out, after all - and it might just be the case of not being able to take as much advantage of that as we would have liked. You could just reframe that as “it’s better to be lucky than good” - which definitely applies in Government. The first form of luck is not getting bad luck - no real economic crises to deal with, for example. To finish off on growth, and lack thereof, then. NIESR has Q2 growth at 0.3%, which bear in mind we have a -0.3% to kick us off, sounds really hopeful again to me. That would see (although this logic doesn’t work, as discussed) their May forecast at about 0.2%. In spite of falling way short on April’s forecast, they have only revised this downwards from 0.4%. I would see 0-0.1% as a more realistic number, with -0.1% perfectly possible. PMIs have recovered but only to flat levels, although this doesn’t necessarily play out straight away - we have 2 weeks left of Q2 of course, but don’t have any major UK-specific economic crises to deal with at this time in the next fortnight! Just as a postscript to growth here - I looked at the end of the last Stamp Duty holiday - you might remember the 2020 holiday was scheduled to end in March 2021 - there was a (really quite late) stay of execution to end June 2021 so that helped a bit with bottlenecks and the likes - but indeed, in July 2021 by far the largest negative contraction was in exactly the same sector - professional, scientific and technical activities - and the ONS report for that month included the following: “The drop in legal activities and real estate activities on a fee or contract basis (which fell by 10.4%) reflects the partial end to the Stamp Duty holiday period in England and Northern Ireland from 1 July 2021.” - so that piece of reasoning does stack up. Indeed the contribution to GDP from this sector was exactly the same in the two months being compared here - July 2021 and April 2025 - minus 0.2%. There’s still another 0.1% to explain of course (even to get to zero) in April 2025 - the other two sectors that contributed around -0.1% each were repair of motor vehicles and motorcycles (perhaps because the new registrations are out?) and information and communication, with a drop in programming and consultancy, and a sizeable drop in the motion picture/video/TV/sound/music industry - perhaps best explained by investment being rocked by the wage and national insurance changes? RICS and the residential market survey then. Straight to the balance number, and it deteriorated from -3% last month to -8% for May. Not a big surprise - but by no means a big negative, and (for once) it quite accurately reflects my feelings about the market in the now. A flat few months seems the only likelihood at the macro level. Even just dividing into North and South, of course, would reveal an anaemic market down South and a buoyant one up North, especially at the lower end of the price ranges. This is a long-established pattern in the “new old world” of interest rates now. There will always be micro-markets that are hot for a variety of reasons - those interested in Norfolk and not already heavily involved in Sizewell C related projects, give your heads a wobble - for example. The rest of the survey - new buyer enquiries at -26%, not good but an improvement on March and April. Sales agreed stuck at -28%, again up from -30% but not much. 3-month expectations - -5%, and I’m less miserable than the average RICS surveyor (and I also remember inflation exists), so my flat market over the next 3 months looks in hand. As an aside - flat markets are great. Lots of reductions. Uncertainty. Those who love an excuse for inactivity will take it. Fewer buyers. LOTS of stock as constantly discussed. Great recipe for portfolio building…. The 12 month reading is back to +25%, back to February levels. The stamp duty comedown has been and gone, basically. The -8% main print is the weakest since July 2024 - which didn’t lead to a bloodbath by any means - but when you break that back to regions, the East and the South West print -34% and -31%, whereas Northern Ireland prints +92% at the other end! Interesting, the RICS report talks of tenant demand regaining impetus after a recent slowdown. +22% is the most positive reading since September 2024. -34% was the print for new landlord instructions - so agents continue to struggle to generate new stock. +43% expect rent increases in the coming quarter - so the little “dry patch” that many landlords I’ve been speaking to may well be over, according to this. Our letting rate has picked up, but not yet to the point where I’d be confident saying that the stretch is over - but as in the 2021/22 sales market, this is from white hot to red hot to temporarily cooled (without a Liz Truss event ahead of us - hopefully!). OK - a better week on the gilts. Not really. We opened at 4.137% yield for the week on the 5y gilt on Monday, and closed at 4.074%, a small down week. Thursday’s close was 3.989%, which we prefer - the elusive 4% breached again! The unemployment figures did their bit, and negative growth (missing expectations) almost always leads to decaying yields. Thursday’s swap close was 3.663%; the discount from the 5y gilt yield was 32 basis points. Concerns from two weeks ago are gone. One month ago the 5y swap was 3.771% yield, one year ago it was 3.937%, for some recent historical context. This puts our best guess of the cost of ltd co mortgage debt at 5.65%-5.7% or so, and our “safe range” of 6% debt cost being a realistic one to work from. The Deep Dive left us with no choice this week. It was the week of the Spending Review, and this sets the tone for the rest of this parliament, and has a major impact on confidence or lack of it - something we are drastically lacking in the UK economy at the moment, in case you haven’t noticed! This was the biggest fiscal event until the next budget; date not yet set, but late October/early November is the favourite. You know the drill by now - this is a 136-page document and don’t worry, I’m not going line-by-line! For the macro, I’m going to add in some of the commentary from the IFS (Institute for Fiscal Studies) as they are the most reasonable, centrist commentators that there are on such things - I’ll also be weaving in my own analysis of course! First of all - what does the document lay out? Departmental budgets for day-to-day spending until the 2028/29 fiscal year, and until 29/30 for capital investment. I’m going to run this analysis as you’d expect - a concentration on the implications for housing, and then a summary of the rest of the review that will impact jobs, the economy and ultimately all of our lives in the UK - but first of all, I’ll set context properly. What has spending done in real terms over the past 5 years (over the past parliament)? Moved up by 3.6% a year above inflation. You’ll have noticed that inflation was rife - and, at points, Big Government was definitely needed. However, the pandemic is long gone and whilst a reasonable shadow would include future research and better measures against another pandemic, that sort of level of growth simply doesn’t match an economy at all that hardly grew above inflation over that period (and didn’t grow per capita). Another way of framing that is that the “deal” that the people got was no more money per head, but more Government spend per head (I hesitate to say “better services” but someone, and not just Government employees, is benefiting from all this). 0.8% per year was the GDP growth between 2019-2024, and the OBR forecast is 1.5% a year over this parliament (a number which we aren’t currently hitting). On top of that the moving demographics of a lot of baby boomers getting older whilst not so many workers come into the population to replace them (migration or no migration), plus debt interest hurting a lot more than it did in the 2010s, and there’s the thorny issue of working-age benefits to address as well. The report, and the jargon, splits the expenditure between day-to-day and capital (investment) spending. In terms of the day-to-day real terms increases (set at 1.7% p.a. Real terms over the parliament) - think, what the people FEEL in the now - 90% of this is going to health/the NHS (excluding devolved departments). Other departments therefore get very little or are cut. At a high level, the Home Office is in there for cuts - political low hanging fruit plus a genuinely messy asylum situation left by the last Government. £2bn down on asylum spending, we are told, and no more hotels within 12 months. We are told. There’s another spending review next year (of course) and this isn’t set in stone. Indeed I’ve commented many times that when another year rolls around, it is another year to pretend to steal from/make “tough decisions” in - when it gets here, that can will just be kicked another 5 years down the road.

Where does housing come into the equation here? Well, a ready reckoner is always the number of times a term is mentioned in the report. “Housing” gets 53 mentions. “Defence” gets 84. “Health” 65, “NHS” 58. It’s fair to say - whilst it didn’t get a lot of headlines in the major macro reviews, it most certainly is near the top of the agenda at the moment/well in the “Overton Window” - the political topics of the moment, basically.

Child poverty is high up on the agenda too - linked to housing, of course, without doubt. Housing plus free school meals/breakfast clubs are the biggest ingredients there, as this Government sees it. There’s much made of the 10-year affordable homes programme - last week the report I analysed suggested that there would just about be enough money if all the affordable homes were indeed at affordable rents, and delivered by not-for-profit providers (not that they are geared up to deliver 90k homes/year, but that’s another story) - and zero social homes. That’s not a reality the Government is prepared to face. They also put the “Warm Homes” grant scheme into the mixer, which will provide insulation, heating and solar panels - for EPCs D-G, households under 36k (roughly the median income) - with up to 30k available per house (15k for insulation, glazing, solar and battery - and 15k further for low-carbon heating/heat pumps). There’s £100 million for early interventions to prevent homelessness that appears relatively quickly in the report, alongside £950 million of capital investment to the Local Authority Housing Fund - to increase supply of temporary accommodation and drive down B&B/hotel costs for TA. Housing for the OxCam corridor rears its head again - I don’t think outside of rail and infrastructure generally to make this happen, the Government will have much of a problem here at all (in the private sector anyway) - there will be developers queueing up because the demographics, household incomes and the likes will stack up in this neck of the woods with no problem! It’s page 31 of the report before we get to a whole section named “Housing”. The report describes a “major shortage”. They are still, utterly stupidly, talking about 1.5 million homes, whilst their absolute best case following wind scenario could be to look like perhaps delivering 300k homes in one of the years later in this parliament (or beyond it) and then multiplying that by 5. It’s just such poor rhetoric when, whatever happens, the vast majority will be built in the private sector by for-profit housebuilders, who the Government have pretty much no control of (especially without help-to-buy type schemes). There’s a reminder (and fair enough) that the rewrite of the NPPF (National Planning Policy Framework) was judged to be worth 0.2% of GDP and boost the economy by £6.8 billion by 2030. That should be all of our styles - move some words around to add billions to growth (and the tax take)! What about beyond the much-publicised (but inherently vastly insufficient for social housing) £39bn pledged - the report also refers to £4.8bn in “financial transactions” (FTs) - catalysing additional private investment to further boost house building. What does this mean? Well, there’s a whole box on it in the report. The claim is that the Government is fostering an entrepreneurial state - and FTs allow the Government to invest alongside the private sector through equity, loans and guarantees. These fit within the fiscal rules framework, which is why the Government likes them - the claim in the report is that this allows the capacity of public financial institutions (think the National Wealth Fund project, and the British Business Bank) - to increase by around 40% this Parliament to £137 billion. No small number. What needs to happen - a financial return or a clear benefit for taxpayers. There’s an annual report too. There are “New opportunities identified” here for FTs to drive growth and there’s an increase of £9.6 billion over the period which will be reflected in this Autumn’s budget, we are told. There is a £1bn increase to the devolved Governments. This “total capacity” - the £137 billion figure - is a bit “smoke and mirrors” - of course - because it includes guarantees and also “recycling” of previous FTs. This might be best described by looking at the split - The National Wealth Fund is £18bn loans/equity and £10bn guarantees, British Business Bank looks similar at £17.5bn loans/equity and £8bn guarantees, UK Export Finance then shows where all the money is coming from, offering up £70bn of guarantees and £10bn loans/equity - and then GB energy comes in with £4bn of loans/equity. The Loan/equity split isn’t clear - but of the claimed £137bn, £49bn is loans/equity. So - at £4.8bn “extra” it is clear that housing forms a very small part of this, whereas most is about exports (that does make sense - the sector still needs repair post-Brexit, whichever way the state decides to go with it). The last line in the report on the housing section - the UK is to launch a UK-wide Mortgage Guarantee Scheme in July to ensure the consistent availability of mortgages for buyers with small deposits. This will be badged, I’d imagine, as the “solution to the deposit problem” - but will it move the needle? Rest assured, it will be analysed when it comes out but it does seem to form part of the plan for the only department that Labour really seem to have a plan for - housing. Pound for pound, they get far less criticism for their housing policy (sure, the 1.5m homes is derided) than their other policies, from what I observe, anyway. The next mentions of housing come under devolution and regional growth. A new local growth fund for specific mayoral city regions in the North and the Midlands (if they still called it thus, this would be levelling up of course) - this is 2026 territory and there are no numbers yet. There’s a promise to analyse the “complementarities” (a new one on me) between housing and transport projects - this is badly needed as an approach. Will it happen though? Next up - half a billion or just over into the children’s social care system, and another half a billion to pump into the estate, and support refurbishment and expansion. This is Labour’s foray into the private sector that is publicly making a lot of money in this area at the moment - nowhere near as dramatic as “promised”, as usual. A lot of the “increase” in the overall budget of the Ministry (Housing, Communities and Local Government, now named - you may well have lost track with name changes over recent years!) - is actually the financial transactions as named above. Not that I don’t like the idea of co-investment as a minority shareholder/equity provider by the state - I do, I really do. I’m just not convinced that it is the same as spending, because ultimately the Government will have far less control over it all - and either 10x the amount, or 1/10th of the amount, forecasted, is likely to be needed! Back to the affordable programme now - of the £39 billion pledged, there’s a reminder and some clarification that this hits £4bn/year in 2029/30 and then rises with inflation (effectively, that becomes protected for this 10-year period) - they are so pleased with this bit, they say it twice within 6 bullet points (pages 81-82 for those pedantic enough to be interested); then there’s the 10-year index-linking +1% for CPI (Ideally this would be far longer, and it really should be) for social rents. There’s a consultation coming about “social rent convergence” - yep, that’s existing social rents going upwards. Next time you send out a rent increase letter/section 13, do you think wording it as “private rental convergence” would help? We then get into £2.5bn of low interest loans for social housing providers over this review period, £1bn of new investment for remediation of social housing - the soundbite you might have heard is that social housing providers are getting access to government funding just like private building owners are. Plans for New Towns and “Cambridge” (sounds ominous for the cantabs) are promised “shortly” (Government speak for - we haven’t really started those yet and that’s why there’s no deadline, I’d imagine). There’s a genuine effort in this report - and I absolutely welcome it - to add some further transparency and accounting reality to some situations. Having been involved in a deal gone wrong some years ago where one of the major blockers was that “temporary accommodation was temporary” according to the Local Authority - when it absolutely isn’t, as we know it, with double digit rises in 2024 - the truth is it SHOULD be temporary for the households currently in that sector (although for many it isn’t) - but the problem is permanent. Permanently crystallising areas such as the Household Support Fund (which includes Discretionary Housing Payments which many readers and listeners will have come across or heard about) into a “Crisis and Resilience fund” - again very Government-speak, but also a good description of what’s needed. This is badged as the poorest families not having children go hungry outside of term time. There is an ambition (just like ending hotel usage for asylum, or B&B usage for TA) to end the dependency on food banks. This is one area where I must say I admire the ambition of this Government and the courage to speak out about it. I really hope that at least one of those ambitions can be delivered - but I’d accept a 50% cut in all three over this parliament because that would be an amazing achievement. It’s a nearly-impossible task - but it’s great to have stretch goals. The remaining entries are around devolved Governments, basically rebadging what’s already been said with devolved, diluted statistics (less money, more money per head - that’s how the formula works). There’s nothing devolution-specific that deserves any more attention. There’s one more chart from here that I thought I would share. This is the old “A picture is worth a thousand words”. This is the impact to all households by decile, over the next 5 years, of the 2024 budget. This is Labour’s mission statement through and through, and whilst I deride forecasts on a weekly basis, you can see why they implemented it - this is the levelling up that they want to achieve. Turn this on its head. You can see why the top 10% of households - who by definition are likely the most mobile, because they have the most money - many were also born outside of the UK (around 1 in 3) - foreign-born households are over-represented in the highest income households. My argument would be it is much easier to leave (and feels more natural) if you weren’t born in the UK. So - the analysis is great if it doesn’t lead to disproportionate numbers of the top 10% - who pay a big old slice of the tax, 60% of the income tax for example - leaving because things have got worse for them over 5 years. It isn’t much of a deal, is it - and whilst again it brings to life the Labour proposition, it might also just be the best representation of why we do end up losing a lot of high-income households over the coming years. What’s the conclusion, then? Well thought out, transparent, ideological, looking after the lowest 10-20-50% - all of the above. Realistic? As realistic as any forecast. I do like the honesty. Can we really create “Big Great Stuff” at a country level using financial engineering? Maybe. Let’s see how these Financial Transactions actually play out. We know there’s not enough money for social homes, but then rent convergence has yet to be fully laid out. The sooner they adopt the Community Rent Model from Darren Rodwell, or an equivalent, the better. Interesting that the cap proposed in such a model is 40% of income, but we are told everything above 30% (according to the ONS) is “not affordable”. That’s one for another day. The rest? Well, defence is coming up. We know that. The NHS swallows nearly everything. We knew that as well. The report was criticised as being hard to understand - I hear that, but dare I say there was an attempt to communicate with those that understood what was being communicated about (with a sprinkling of ideology of course, and the occasional passive-aggressive reference to the terrible inheritance, although it’s impossible not to remember that), and so it wasn’t “for clicks”, it had a purpose and it had a go at delivering that. The IFS director Paul Johnson made the point that it’s all about how it IS spent rather than the forecasts, but that the decisions were and are incredibly tough. He closes his analysis by pointing out we will be watching the performance versus the forecast in Autumn from the OBR - and we will. I’ll be watching the OBR output here, monthly - out-turn versus forecast. As we stand today we aren’t looking at more tax rises in October/November - as it stands today. What happens in July when tariff-gate kicks back in? What happens if Oil goes over $100/barrel - it’s the same as usual, the risks are to the upside in terms of yields unless the mess gets recessionary and then rates will be cut. We aren’t heading for that in a realistic scenario I can see at the moment, but we are in for a bumpy ride. Stay tuned. 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! Hurry, because those EARLY BIRD tickets only have a week or so left - book 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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