Sunday Supplement 19 Oct 25 - Housing Completions Meltdown Incoming/Underway

"The decline in output has been caused by multiple factors that go beyond planning policy” - The Home Builders Federation. This week’s quote pertains to the deep dive, as it often does, and I go deep into the recent reports about the state of the UK housing new build market from multiple angles. As the calendar creeps towards a new year, it’s a natural time to pause and tackle the biggest challenges that keep small-to-medium enterprise (SME) property businesses from achieving true, sustainable growth. For most, this boils down to two core areas: Laying a bulletproof strategic plan for the next 12 months, and finally cracking the code on financial measurement and accountability. If you’ve ever felt lost in a sea of bookkeeping data, or if your productivity methods are falling short, it’s time to switch from doing to leading—and truly understand how your assets are performing. Book in on the next Property Business Workshop with myself and Rod Turner - Thursday 22nd January - https://bit.ly/pbw9 Trumpwatch kicks us off. The day traders call it the “TACO” - Trump Always Chickens Out - and indeed, after the meltdown on Friday 10th October, particularly the eye-watering losses in what are kindly called “lesser crypto assets”, the TACO trade seems to be alive and well. The Donald has confirmed he IS meeting President Xi, and that his floated 100% China tariffs are “not sustainable”. The markets responded positively. The party line is still “reciprocal”, tariffs based on trade balances. Not reciprocal of course, but nonetheless, easy enough to understand. The S&P is trading around 23 times forward earnings per share, the highest multiple in about 5 years. The wisdom of this seems questionable - but there’s been chatter about the markets being overbought for a couple of years now, and the market can stay irrational longer than you can stay solvent - particularly with an irrational actor having such a huge influence on them. Politically, the development of the Abraham Accords is back on the table, continuing his peace and stability in the Middle East project. Meanwhile, the 20 point plan is stalling, and for those who have observed Hamas have a limited amount of “gain” left by the time we have considered the “release swap”. What political pressure is being put where by Trump/Washington is anyone’s guess, to be honest, but that one is likely best kept off Truth Social as much as possible? In the Trump 2.0 presidency, that largely represents a quiet week! What a world. Back to our homeland - the real time UK property market. Chris Watkin dunks another one - Week 40 (really, already!) in the basket. Listings printed 32.7k, down 1700 on last week, as the market starts to slow down towards the end of the year. My “10% more stock than a normal market” ready reckoner continues to work on the back of circa 2 years of overperformance in listings compared to historical averages. There have been 1.44m homes listed this year so far! We are 10.2% ahead of the 9 year average, but that does include 2020 which pollutes the figures somewhat. We are really inching back towards the 2024 numbers now, week by week, having been 6-7% above them at various points in the year - but we are still listing more than we are selling (as always), so it is all eyes on the withdrawal rate as a general rule. We are only 2.2% ahead of the 2024 listings YTD now, but are still around 10% ahead of the 2017-19 average. It is only one week, but we listed 7.8% fewer houses in week 40 than in week 40 of 2024, and very nearly the same number that we did in week 40 of 2023 (still well ahead of the pre-pandemic average listings for week 40, though). Price reductions in week 40 - 24.6k. September’s completed number was back to 14.1% for reductions - August’s 11.1% now looks a summer anomaly as the numbers came back to the 14.1% reduced in July, 14% reduced in June, in comparison to last year’s 12.1%, May’s 13.4%, and the 5-year average of 10.7%. 2025’s average is 13.2%. More stock, more reductions - absolutely and relatively. 23% more reductions than the 5 year average, if you take the difference between 13.2% and 10.7%. “25% more reduced properties than a normal market” also works as a ready reckoner, or is likely to even be an underestimate just because of the amount of stock out there. We’ve still had more than 100k price reductions in the last month. Can’t find a deal? Just keep the legwork up and you’ll get there. You don’t tend to see 13%+ of stock being reduced in strong markets, by any stretch. 24.8k homes sold subject to contract, healthy enough. The 2025 average is 26.1k. Week 40s on average print 24.8k (over the past 9 years) - so we are smack on. SSTCs are up 5.1% year on year and 13.2% on 2017-19, and are now ahead of 2022 (we’ve passed the “day of the lettuce” and now into aftermath territory). With SSTCs up 5.1%, whereas listings now are only up 2.2% on last year, this signifies more “intention to transact” than 12 months ago, to this point in the year, for sure - or, put a different way, comparatively this looks like a more functional year than 2024 was (even though stock numbers have continued to rise throughout the year due to relentless listing). We went into October with 751,797 homes on the market - an increase of 15k on 1st September’s number. September is usually a rise in most years, so there’s nothing unusual here. We aren’t back to the 763k peak at the beginning of August. The trend continues, and this week we had more SSTCs and fewer listings than the week before. Let’s see how that continues to play out throughout October. It still feels like that 763k will be the cycle peak now. For context, 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 September 2024, 723k were on the market. Ongoing figures will be interesting as we don’t watch the number of properties withdrawn from the market week-on-week. There were only 4% more properties on the market on October 1 2025 compared to October 1 2024, but the 2024 number was already the 8-year high. Chris also looks at the per square foot on sold STC properties. September saw a sqft pricing on sales agreed of £336.54 which is lower again - the previous numbers for context: August was at £338.78/sqft and that was 1.41% higher than August 2024 and 14.25% higher than August 2020 - but down 2.2% on June’s SSTC number of £346.45 and down 1.75% on July’s number of £344.78. This is a pretty dramatic drop and will start to play out in early 2026 numbers, when the figures hit the land reg, down into the 1.5%-2% region for 2025 (it isn’t quite an exact science, although these figures are the most helpful of all of them out there). A September slide, small as it was, on the back of August, is still 0.7% down. June to September has seen a drop there of 2.9%, and whilst that doesn’t necessarily play out in the exact amount the market will drop by 5 months in advance, it does look like it will be a relatively tough Q1 as far as the land reg reporting will go. Fall throughs stayed slightly above the long-term average of 24.2%, printing 25.3% - there’s still been very little volatility around the long-term average for many weeks now. The net sales were OK - 18.5k, 4.3% up on last year and 10% higher than 2017-19 - not quite at 2022 levels (only 400 behind, now, total, edging closer week-on-week, with the “big catch-up” having started with the 2022 post-mini-budget market meltdown coming up) - there’s now no doubt 2025 will outstrip 2022 with it being so close and the last quarter of 2022 being quite so poor post-lettuce. Week 40 9-year net sales average 18.2k, so just about ahead of that number. 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

What’s in this week’s macrotation? “Meat week” is split over two weeks this week, so we “make do” with the labour market and unemployment, growth, and then the statutory homeless stats for Q2 2025 which I get a chance to squeeze in. Last up? Gilts and swaps, yes of course - I missed them last week in my enthusiasm for the intergalactic waste of taxpayer money that is quantitative tightening, that won’t happen again (well, the quantitative tightening bit will, but the missing of the gilts and swaps won’t).

The labour market report contained some big news - the first month for some time that suggested we did NOT go backwards in terms of job numbers. 10,000 were added month-on-month in terms of payrolled jobs, for the first increase since January (yes, every other month has been shedding with March to May being particularly bloody around the employers’ NI rise). January was also an anomaly as there was shedding before that, after the 2024 budget, in preparation. 10k is not big compared to the 93k lost on payrolled jobs between August 2024 and August 2025, but we need to start somewhere. Is it an anomaly? We will find out. It’s still a quarterly loss of 31k jobs. September’s “nowcast” estimate is a loss of 10k, wiping out August’s gain altogether - but the nowcast tends to be bearish almost every time, so let’s stay positive. Those who have “been here before” with me on a labour market report know that I prefer the whole picture - employment rate (16-64), 75.1% - unemployment rate (16+), 4.8% (up 0.1% and the one that makes the headlines) - and inactivity (16-64) - 21%. Vacancies also give you a snapshot picture - and that snapshot continues to be a looser labour market. The 39th consecutive period with dropping vacancy numbers, but happily only by 9,000 this time out to 717,000. That’s 78k fewer vacancies than Q1 2020, the pre-pandemic yardstick. Did this clip the wings of earnings? Not so much. Excluding bonus, wages are still up 4.7% and wages including bonuses are still up 5% - breaking back to 4.4% for the private sector and 6% for the public sector, which is always a source of annoyance in the rare periods when it does happen! Adjust for CPIH though, the ONS preferred measure of inflation - and the real pay growth is 0.6%, or 0.9% if we adjust for the wider-used CPI (1.2% if we use total pay including bonus). A mere 15k days were lost to labour disputes in August 2025, as people went on holiday instead of on strike, you’d think….. My own experience? I am currently recruiting for a position within my core team. It tends to be the case that I will take control of that process. A similar position was advertised, with a similar rate of pay (adjusted a little upwards) 18 months ago. 18 months ago I could find enthusiasm, potential, and ended up with a great candidate but there was a significant amount of industry training required. Today - 3 or 4 really solid applicants this week with varying degrees of experience in the property industry, some extensive (and indeed more than mine in terms of years). All of them aside from one? Recently made redundant. I don’t remember speaking to a redundant candidate or seeing a CV from a redundant candidate 18 months ago. The difference is stark. Across other businesses we have made 8 staff redundant this year, and we employ around 100 all told - all with an economic gun to our head to preserve the viability of the business. For the first time I can remember, the employment rate is also DOWN on the quarter. An unspoken piece of the figures that Labour have - to an extent - been unlucky with - is absorbing many of the longer-term sick who have come back to the labour market post-covid. Inactivity has reduced dramatically, however, there is now no change on inactivity this quarter, but there is a 0.2% drop in the employment rate - meaning that’s the sole reason why unemployment is up 0.2% this quarter and 0.1% this month. The economists as a whole thought we would stay at 4.7%, but instead we hit 4.8%. Every 0.1% starts to worry people more and more, and if and when the 5% barrier is crossed, that will be a psychologically interesting one in terms of politics.

To Growth, then. There was some! The smallest number, though. 0.1%, in line with all expectations, for August. Looks relatively in line and in context with the PMIs of the time, and with the -0.1% the month before (that was a revision downwards from 0). Sideways, sideways, sideways - this was a growth report that giveth and taketh away in equal quantity. It still breaks back to 1.3% growth this year - far, far better than you’d think if you only listened to the misery on social media and in the wider media. Please note, this is not the same as Labour doing a “good job” - more a fact that luckily, the economy largely keeps calm and carries on regardless of whatever idiocy is going on at number 11 (lettuce and other salad items aside).

The 3-month number, 0.3%. That was services up 0.4%, held back by production output down 0.3%. Unlike the PMIs, construction output was up 0.3%, which also grew the quarter before (we’ve had 9 months below the 50 handle). Again - to note - this isn’t resi building activity, which I will get into at greater length in the deep dive. The monthly numbers were different as production grew by 0.4%, construction fell by 0.3% (more in line with a terrible PMI handle for that month) and services were static. What did well? In services, human health activities, and also rental and leasing activities (that were up 5.3% on the month). Arts, entertainment and recreation shrank 2.4% on the month by contrast. Services overall however have now not grown for 2 months on the spin. There’s a current streak of 6 quarters in a row of positive service growth, but that is at risk for Q3 of 2025 it seems. Construction continues to confound the PMIs, but the growth is in repair and maintenance it seems. New work was indeed down in the 3 months to August 2025. On its own, repair and maintenance was the only quarterly positive, but it was so far forwards that it carried the rest of the sector (including a public housing repair and maintenance sector that shrank over 0.4% in the quarter). Where was the specific weakness in August in construction? Glass, cement, plaster and concrete, iron, steel and wood. Basically all construction materials! The UK cement production levels fell to a 75-year low. Then - as always, and just evidencing why it is clear to go through the reports to a level of detail - the bit that didn’t make the headlines. The revisions since the last monthly release on 12th September. GDP has been “edited”. It has been trimmed by -0.1% in July - as made the headline in the report, but also by -0.1% in January, February, March and April. The only mitigation is a 0.1% upwards revision for May 2025. On balance, rounded, that makes a -0.4% adjustment - or an £11.2bn revision downwards to GDP - with a tax take implication of c. £4.25bn. The wrong way. Before a horrible budget. “Bad luck” really doesn’t cover it. Donald Trump would be firing people at the ONS. HOW does this stuff not get reported? I know (even though that was rhetorical) - people don’t bother to read the report, they just read the headlines. I feel that not putting this in the bullets is a little duplicitous by the ONS report writers, to be honest. Anyway, rant over. On to the MHCLG Homelessness stats. They are better news than they were in 2024, that’s for sure. In Q2 of 2025, the number of households that had an initial homelessness assessment was “only” 86,370, down 6.7% from Q2 2024. A further 36.2k were assessed as being threatened with homelessness, also down 4.6%. 6.53k of these were down to section 21 - a vastly lower percentage than is often advertised by the lobby groups - 18%, and down 8.7% from Q2 2024, happily. Much of the RRB serving of s21 is done, it seems? 42.47k households were assessed as homelessness, and owed a relief duty, down 9.4% from 2024 Q2. Those with children decreased 12.6% from Q2 last year, happily, but still numbered 11k. However - the nasty bit that only makes the final paragraph of the summary (the report opens with the great news that those presenting as homeless has fallen, quarter on year) - the number of households in temporary accommodation as at 30 June 2025 was at a record level. This is a 7.6% increase - and households with children were up 7.5% (to 84.24k), single households up 7.9% (to 48.17k). The first thought here might be - why? Well, the speed at which people are coming in to the top of the “funnel” here has been slowed down - great news - but the amount of people coming into the top still exceeds the number of people managing to get out of the bottom of the funnel in a timely fashion, sadly. 36,160 presented with a prevention duty, and 35,410 saw their prevention duty end in quarter 2, for example - close, but still moving upwards. Main duty homelessness assessment breakdown for quarter 2 is also illuminating. 25,090 decisions were made, of which 16.440 were accepted as homeless, with priority need, and unintentionally homeless. That’s 65.5%. 1,080 were judged as intentionally homeless. 7,350 were assessed as having no priority need. 220 were assessed as “not homeless”. In London the temporary accommodation rate is 2.03%, compared to 0.28% in the rest of England. Newham hit 5.9% in Q2 2025. Slough was the highest outside London with 2.48% in temporary. Eye-watering stats in those areas, I think. Some good news - whilst 14,250 households were still living in B&B by the end of Q2, this was down 22.4% on last year. This is now 10.8% of households in TA, down from 15%. Households with dependent children were down 43.5%, but still represent 23.4% of households in B&Bs. The Government’s stated goal is to end that by the end of this parliament. 2,070 of those 3,340 households had been in a B&B for longer than the statutory limit of 6 weeks. The peak was 30 June 2024 at 3,770 and so this is moving at a reasonable speed in the right direction. Next up - a sentence which only a Government report can deliver. “The most common length of time for households with children to have spent in temporary accommodation is 2 to 5 years (18,940 households or 22.5%).” 32.6% are in nightly paid self-contained accommodation. Adult-only households remain in TA for less than 6 months, on the other hand, more than any other category (33%). 42,080 households in TA were in accommodation in a different local authority district. 0.17% of households in England are in a TA unit in an out of area placement, and 81.5% of these placements were from London authorities. Other out of area placement hotspots outside of London originated from Manchester City Council, Oadby & Wigston Borough Council, and Adur District Council. 86.3% of out of area is within the same region, but therefore 13.7% is not - percentage wise, the worst offenders for out-of-region placements are Yorkshire/Humber, the East of England, and the South East, all at 19%-20% out of region (as a percentage of their out of area placements) What was the most common reason for homelessness assessed as being owed a prevention duty in Q2 2025? End of AST. Why? Landlord wishes to sell or relet, which is distinctly different from landlord wishing to sell (apparently), which is then landlord wishing to relet the property. I wonder who is answering that question - the tenant, the landlord, or the council. The most common age bracket of the lead applicant was 25-34, representing 27.6% of the applicants, followed by 35-44 which was another 25.3%. 1.4% were 75+ and 0.6% were 16 or 17. Every category had fallen in number apart from 65-74s and 75+. 36.5% of lead applicants were unemployed. The next largest category was those in full-time work, at 12.4%. Always a sobering report. Moving on with the gilts and swaps, and we had a happy week. Somewhat because US bond yields have been trending downwards with the US 10-year making some real progress. Tuesday morning’s unexpected tick up in the unemployment figures, as discussed, did us no harm though. The 5y gilt opened the week at 4.128% yield and closed it at 3.983%. Nearly 0.15% down. We will take that. Thursday’s close was even better at 3.956%. That Thursday close translated into a 5y swap close of 3.617%, lower than 1 month ago at 3.732% and 1 year ago at 3.669% - but stable, as I have been saying for some time. A turn-up on recent weeks though! The 30-year? Also down c. 15bps this week, actually 15.1, down from 5.494% to 5.343%, which looks more palatable. The yield curve stays roughly the same shape, and is still starkly steeper than last year. So I’d be pricing new mortgage debt expectations around the 5.6% mark today, once fees have been included. That leaves yields needing to be 7% or a little lighter for those who manage themselves or have very tight cost bases, or 8%+ for those of us with larger, and more layered, operations.

The gilt section and this week’s activity leads us on to a 2-pronged deep dive. First up - housing starts, and lack of progress - particularly in London - there have been a few illuminating reports this week which I’m going to do a whistle-stop tour of. I’m also going to discuss the Bank of England speeches that have been taking place, since it is clear - as usual - that some members of the committee are in different places to others.

It’s almost a case of where do you start! Thanks to one Supplement reader who sent me a copy of the Molior report for Q3 on residential development in London. It paints a stark picture, covering schemes of 20+ homes. It starts with context - between 2015 and 2020 there were 60k-65k homes for private sale or rent under construction in London at any one given time. Today, that’s 40k. 5.3k of those are halted - part-built. The Molior forecast is that due to substantial completions expected in 2026, the number will be 15k-20k by 1st January 2027 (under construction). Their push is for the Government to remove unnecessary development costs or adjust stamp duty. I see zero chance of that yet - the Government will just try to cover it up and blame the Tories come 2027, which will be too late/too long since the blues were in power. Sadiq Khan will look more than a little silly hitting 6% of his target. Yes, 6%. So what are the drivers here? Very low sales rates - under 6k new homes sold in the first 9 months of 2025 in London. This looks like a re-run of the reasoning behind the Zoopla report on viability - at prices up to £600/sqft, the level at which most London owner-occupiers can buy - sales to individuals are virtually non-existent. If they can afford it they don’t want to buy it - and/or unless it is expensive enough to be viable, then it isn’t affordable for many. There were fewer than 1000 sales under £600/sqft in London of new builds in the first 9 months of this year, and fewer than 300 of those were to individuals (whether they be UK based or overseas!). The rest was BTR, bulk deals and affordable switches. There’s a nod to the loss of off-plan investors and how much that has contributed - because with early-stage sales schemes are shown to be viable and therefore financeable. Build to rent completions are about to plunge (the delayed Lettuce effect, here - construction of BTR starts were decimated in 2023 and 2024, and so that hurts from 2027 onwards). Molior sees higher rents and more overcrowding - I expect more of the latter than the former, because affordability is already squeezed quite so much. 3248 starts in Q1 - Q3 2025 of the 66,000 target shows I was being too generous to Sadiq Khan - that’s 4.9% of the target, or a miss by 95.1%. There’s time to squeeze in the issues that the building safety regulator are causing. One in 6 projects are halted, usually for one of two reasons - a bust main contractor, or the sales market is just too weak. Completions look to halve in 2027/28 compared to an already incredibly limp 2025/26. Prices are not falling per se (the data backs this up - the reality is, they absolutely are in inflation-adjusted terms) - but the rental market backup offers a “second out” here rather than discounting. Under construction sold vs unsold sits at 50% which Molior describes as healthy. Above £1000/sqft less than 50% is sold, but it doesn’t look terrible until it gets over £1500/sqft - prime stuff, that presumably isn’t moving because the wealthy don’t fancy putting themselves in Rachel’s crosshairs any time soon. The other reason for not discounting is that margins simply don’t allow it in this day and age. Molior writes off 50% of London, because they are areas under £650/sqft - so they say that even with free land, and no CIL/s106/affordable, it cannot work with development costs where they are today in London. This all leads to 920 residential developments; 281k unbuilt permitted homes (that’s private plus affordable). Outline, detailed and unbuilt phases of schemes currently underway (so this number would never be zero, to be clear, but that looks like a huge number in the context of the rest of the numbers being mentioned here). The venn diagram as far as Molior is concerned - the sweet spot - is buildings under 18m that are above £650/psqft; i.e. about 10,000 homes. 54% of unbuilt permissions are in schemes under £650/psqft. Developments above 18m, however, account for 90% of the unbuilt permissions. What a picture. As it says within the text - I’d expect overcrowding first, and rent rises second - but they will keep moving upwards alongside wage inflation, I would expect (depending on the rest of the cost of living of course). The Centre for Policy Studies released a report in this last week that prefers to call London “The City that Doesn’t Build”. They cite a building rate that is below 25% of the rate throughout the rest of England. Why? Fairly simple in their eyes:

Median home is 11.5x median London salary. I don’t like this comparison, because there’s such a stark contrast between the salaries of homeowners and renters, but, apples with apples, 7.6x is the number across England whereas the ONS threshold of affordability is 5x, as discussed over recent weeks
Average London property sells at £667/psqft (note how close we are to the Molior number here too)
London has an incredibly low vacancy rate - contrary to some beliefs. There are fewer than 1% of London homes that are long-term vacant. The average vacancy rate across the OECD is around 10%. London has the highest level of overcrowding across all of England, of course.
The average private renter is spending 40%-50% of income on rent
London has the fewest homes per capita of any British region and is far below the average in France, Spain, Germany
Homes England estimates that increasing London’s housing stock by 5% would decrease housing costs by 10% and raise economic productivity by 3.1%

London housing starts are 0.12 per 1000 people. Compare this to the East Midlands where there are 0.79 starts per 1000 people! (Q1 2025). CPS describes this as a “slow-motion tragedy”, a very powerful phrase. Sadiq Khan has actually done a fairly average job (although his promises for things like 88k starts do not help him) and the massive dropoff in completions all coincides with the time of the lettuce, and Covid (and the building safety act) - but he’s never moved the needle to where it was when Boris was mayor, I’m afraid, and he’s done nothing I’ve seen to mitigate any of this. CPS highlights 6 root causes; the macro environment (agreed, but where’s the policy to tackle this?); The Building Safety Regulator and Second Staircase Requirements (same - misguided and will hurt things for years to come before finally repealed when nothing is getting built); excessive affordable housing requirements (the solution according to Rayner - put them up); Misguided policies in the London Plan (direct responsibility of the Mayor?); Lack of Industrial Intensification (a new one on me); and “poor use of opportunity areas” - I’m sure. The macro - building cost inflation, up 21% 2021-2023. Interest rates and gilt yields are too high to bother borrowing to build. Increased cost of building and capital - a lethal cocktail. Housing starts are down 10% in England, but 73% in London over the past year. It seems very clear that the blockage in the >18m space is the key factor here, to me at least. Because of the new “gateway” system, 69% have been rejected for Gateway 2 (Pre-construction). 92% of 193 new buildings are held up by the Building Safety Regulator - the median waiting time is 36 weeks. How can you possibly cope with this as a business? Gateway 3 currently takes about 4 months, but is only lightly tested and has had some delays over 18 months. Completed, empty, before people can move in. The risk management looks all wrong - the risk is old buildings, and overcrowding. By scuppering new buildings, that risk goes up, not down, because it causes yet more overcrowding. The BSR is in a no-win scenario. It gets nothing from approving a building, but has everything to lose when approving a building if there was an unrecognised fault down the line. Remember the CPS is a centre-right think tank, but it is influential. They also directly informed Right to Buy - and look what happened there (not all bad, but the lack of replacement should never have been countenanced). Let’s also bear in mind though; the second staircase requirement in France, Germany and Ireland is buildings above 50m. The official impact assessment showed a cost of the regulation overall would be 294 times the benefit (really). In a 70-year modelling period having a second staircase in a building between 18 and 50 metres high did not save a single life. The cost/benefit ratio between 18 and 50 metres is actually 1200:1. Where do you even start with that? Remember Rachel and her “cutting unnecessary regulation to promote growth”? Let’s be fair here, though - this is a Michael Gove legacy, a knee-jerk response to Grenfell which is causing this slow-motion car crash, hurting hundreds of thousands but insidiously, invisibly, and slowly. How about affordable? Fast-track approval for sites with 35% affordable or 50% if on industrial or public land was the offer - the “old money” percentages were 22% to 26% in Boris’ “good old days” (when still, nowhere near enough housing was being built in London - but it looks wonderful compared to the current environment). If the developer doesn’t accede to the 35%+, then they face a challenge at the end which might mean surrendering unexpected upside. This is a bit of a classic Labour case at the moment. Higher taxes don’t necessarily get you where you want to be - usually you want them to create revenue for the Government or the Local Authority - but here the “tax” is creating more affordable units (for social good, right)? But like all taxes - go too high and behaviour changes. What happens here? People stop building. No new builds, no ripple effects. They cite a Finnish study which showed 55% of the benefits of market-rate housing reach households in the bottom half of the income distribution, and 36% reach the bottom 20% - so they are social-mobility-beneficial too. There’s a case study of the Stag Brewery in Mortlake. Closed late 2015. 850 homes approved in 2020 with 17% affordable. Called in by the Mayor - “too low”. 1,250 were then asked for, with 30% affordable. This was rejected in 2021 due to height and scale. The updated plan NOW - 1,075 homes with 7.5% affordable. Genius. And only six viability reviews during construction to come. Who would be a developer? An upside-only bet for the local authority or the government - but the behaviour change here is that fewer people play the game, because there are better, safer, and more financially rewarding games elsewhere. 347 affordable homes were started in the capital in the first quarter of this financial year. With CIL and s106 at 5-15% of GDV…….holy moley. As far as the misguided policies go, this reminds me of a bad tax planning scheme of which some readers and listeners will be far too aware for comfort - nevertheless I’m going to use the analogy. 113 different policies that sound perfectly sensible on their own and even have precedent - but mix them all together, with no idea of what the actual outcome will be - and who bears all the risk? The “buyer” of the scheme - in this case, the developer. Another classic appears here - make advisory space standards MANDATORY in London. The average renter can only afford 25 square metres of space, according to CPS, but 37 square metres for one person or 50 square metres for 2 is mandatory. You couldn’t make it up. It is all a complete lie and this is how you end up with 4 people in a one-bedroom flat which most certainly is not uncommon (as I’m sure many more experienced heads in London property could confirm). Onto lack of industrial intensification - there’s a 640-hectare site next to Old Oak Common - Park Royal - that is surrounded by 11 tube stations, but building homes on the site is effectively banned according to CPS. It is like they are doing it deliberately (I don’t believe they are - I believe this is just incompetence - they are too incompetent to be deliberate about anything, but I felt exactly the same about Boris during the pandemic). Don’t worry - there will be a new London plan by 2027/28 - just in time for the next election, do you suppose? How about the opportunity areas, identified in the 2021 plan? 47 of them, with potential for at least 2,500 new homes, or 5,000 new jobs. Great work identifying these - but delivery in these areas, hence, has fallen! 5,500 homes in opportunity areas were completed in 2024, compared to 20,000 in 2019. Why? Well, 14 flats in the Lee Valley North Opportunity Area took a 1,250 page planning application, and >1 year in, there is still no planning granted. The conclusion - ultimately, this needs urgent attention - the unsaid part that is clear to me, so I will say it - is that it won’t get it, and this will limp along and get even worse before the next set of promises that won’t happen. London’s housing “customer experience” will get far worse yet, and until there’s a huge change, it won’t improve organically - the situation is literally a zugzwang. Moving out of London, to “key cities” - 25 mid-sized UK towns and cities, a cross party network - they have ALSO produced a report on “turbocharging housebuilding”. I am not sure whether to laugh or cry at this stage. These key cities and towns are the Lincolns, Plymouths, Wolverhamptons, Salfords and Stoke-on-Trents of the world. Wales is represented by Newport and Wrexham. Where does their report get to? Well, where I started when I commented on planning permission changes when they were first announced! A great start, but lots of other problems blocking delivery - it’s only taken 16 months or so for the authorities to catch up to the blindingly obvious, so that’s about the timescale I expected. NOW it is “more about viability and funding barriers” - no, it always was. Sure, help with planning, but why are unbuilt sites sitting? High remediation costs, skills shortages, and limited council powers and funding, according to the Key Cities report. What do they want? A £3bn land and infrastructure viability fund to unlock stalled brownfield and grey belt sites (could well be a positive NPV/reasonable investment case there). Support for SME builders with simplified planning and VAT rules for sites under 100 homes (ambitious, but well done for calling for it!). A fairer definition of affordable rent (130% of social rent, which is often about 50% of rents, so that would be 65% of market) rather than (up to) 80% of market. That would be nice, I’m sure, but won’t help with viability let’s face it - but is a “fair” call for the tenants, because often 80% really isn’t that affordable these days. You would be better off with a Darren Rodwell inspired “community rent” model, or a flex rent - but I’ve only said that a million times before…… Then - more devolved powers (which are coming, we are told, or WERE coming before Reform started winning so many local authority seats - I’m a huge cynic here). And then higher energy, space and accessibility standards. Really? I am not convinced of the cost and benefit analysis here if viability is the problem. 90% of the 25 Key cities and towns report a “critical shortage of affordable housing” and this isn’t large urban centres, remember (Salford and Wolverhampton aside, from the list, because of proximity to larger urban areas). There are also some successful case studies - Derive in Salford, Goldsmith Street in Norwich, Fortior Homes in Stoke, and the Holes Bay regeneration in Poole. This is 10% of the UK’s urban population, outside London, and these cities and towns contribute £150bn to GDP - so, a little over 5%, but if they are having problems at their size - it really puts the problems in London into context, and the urban cities in between these two poles. It seems like lobbying week, perhaps because we have just finished conference season - next up it is Savills turn with a research report for LPDF (the Land, Planning and Development Federation) - you might not have heard of them (I hadn’t) as they haven’t been around for that long (in context - 2018). Why do they exist? To bring together land promoters, strategic developers and others who specialise in bringing forward decent sized chunks of land for housing and/or mixed-use development. What are they arguing for? A new equity loan scheme for buyers. Let’s call it “help to buy 2.0”, because that’s what it is. How do they frame it? New home sales in 2025 have collapsed to their lowest levels since the Great Financial Crisis. I warned of this back in 2023, when developers still managed to push new-build prices upwards whilst the rest of the market went back about 3%. That created a near-5% overperformance against the secondary market which was unjustified and would always “catch up” at some stage. It appears we are there. SME builders are hit the hardest because they cannot deal with the slow sales rates, they are more likely to use more leverage, and the increased project finance costs are also higher for them because SME money comes at a premium. No argument with any of that - and on the ground, I talk to people all the time who are halfway through (or thereabouts) selling sites between 5 and 55 units, and are being scuppered by backed-up and over-term development financing, watching their profit seep away. As we know from months of analysis of the real-time market - larger homes and higher prices sites are selling particularly slowly. They say “particularly in the South East” but I’m not sure that’s right - there are just a lot more of them in the South East!? Diplomatically, they say it is “hard” to see the 1.5m homes being achieved - whereas their own forecasts are sub-900k as we have discussed before. So. HTB 2.0 for New Builds ONLY, please, is what they want. Smaller deposits, cheaper mortgage rates (?), lower LTI ratios, and an interest free period of (for example) 5 years. Well, you might as well ask for the whole cake, right, rather than cut a slice? The carrot? Helping households “locked into renting” and helping families get “suitably sized homes” (bit of a laugh based on some new build sizes these days, but, OK). Their analysis suggests that there could be another 100k new-home sales for FTBs by March 2029, stabilising things, enabling quick expansion of housebuilding capacity (so, basically, Government you can’t hit your target without doing this, we still don’t think you will hit it if you do do it, but you’ve definitely tried). Also, the suggestion is that this could turn the fortunes of SME builders (which seems unlikely - last time out the biggest players were the biggest beneficiaries, of course - but then if you were so minded, you could always do it on sites of fewer than 30 homes, or 100 homes, say). Equity loans are mostly repaid within 5-10 years if they go forward with the plan proposed. Mostly! In fairness, they do also try to address much of the old critique of HTB 1.0 - for example, price inflation and excess housebuilder profits. So - price controls (!) indexed to local values. Sounds surprisingly “non-market-forces”! FTBs only being targeted will help (but will it…..) - with conditions on affordable housing delivery (good idea, carrot for that stick) - UK supply-chain usage (hard to enforce) and apprenticeships and workforce expansion (that works in a time of rising unemployment and desperate skills shortages!). Overall, though, the push is for something simplistic that appeals widely. They suggest avoiding mortgage guarantees - because they don’t reduce repayment costs, they don’t reduce loan-to-income limits, and they don’t prioritise new builds (so they don’t help to boost the housing supply). Also - the take up of mortgage guarantee schemes has been tiny compared to equity-loan schemes. Their timing is wonderful, let’s face it. The housing ministry must be seeing these reports and it is their biggest kick in the teeth thus far. IMLA - the Intermediary Mortgage Lenders Association - also released their September market briefing, and I wanted to squeeze that in too because there are a couple of bits in there that I haven’t seen said anywhere else. Firstly - they believe the market recovery after the SDLT changes is already complete, after a solid July. It included £39bn in product transfers (which are NOT measured in the Bank of England’s money and credit report, it only looks at remortgages with different lenders, not PTs) - this is an all-time record. Also - high-LTV lending that month rose to 7.8% of the lending book - that’s loans over 90% LTV. That’s the highest since 2008. I always feel nervous if I type that sentence, but at this time I don’t see any cause for concern. Buy-to-let lending is also reported as repairing significantly, which we knew - but BTL mortgage demand was at an incredible low. It is a shame UKF have changed the way they present their data because now it is a lot harder to follow than it was before - I love these “improvements” with really important, publicly available data on refreshes of websites that likely cost tens if not hundreds of thousands of pounds! They finish with a little speculation - confidence in investment in property might improve if long-term yields ease post-budget. Will that happen…….BIG decisions for Rachel Reeves, that is for sure. Two more in what was a fantastic week for reporting - one sector I cover very rarely, because I have limited interest in it for long-term strategic reasons. Student. However, this Cushman & Wakefield report couldn’t be ignored - their UK Student Accommodation Report released in the past week. It’s the takeaways that caught the eye (well the report is 90 pages!) and so here they are: £2.8bn transacted in the first 9 months of 2025. Sustained appetite during tighter credit conditions, would be a fair summary. It isn’t like the mid-2010s and/or the cheap money days! However, it is a good recovery from 2023. Student visa issuances fell 30.8% in 2024 in the end - no wonder the sector was carnage in some areas - but 2025 is on track for a 7%+ rebound, robust particularly in the redbrick/Russell Group cities. Next up was the one stat that really caught my eye. University-managed accommodation rents grew 4.44% in 2025, compared to the private sector’s 1.16%, for the first time in seven years. However - this doesn’t strike me as sustainable - more of a knee-jerk response to increased costs, inflation, energy prices and the likes. For the whole year, they are expecting just under £4bn in volumes, so not as much as 2024, but not bad. However - the universities were ready as they knew the student volumes were down, and were better at filling their own stock - the private sector had to compete on price, and pronto, whenever they caught up with the trend. The lower-tier stock (which would be 1990s-2000s PBSA blocks, old by international standards and old in the context of the history of PBSA) saw rents up 4.14%, prime new-build rents fell 0.98%. A flight to affordability, it seems, but like everywhere, collar rents performed well. Average price per operational bed? £100k, notably below the cost for new units. It won’t surprise you to hear C+W say that new schemes are financially unviable without subsidy or discount land. This is constraining the development pipeline and indeed CBRE have suggested there will be a huge shortage of PBSA by 2030 on the back of this. Postgrads fell by 9.7%, with more losses this year, suspected to be about 17.3% down from the peak since the visa rules changed. Undergraduate looks more resilient and that’s moved upwards by 2.8% for 2025/26. Yields - which I never understand in PBSA, they just look far too low to interest me and that’s why I’ve never got involved - hold at 4.25% for prime London and 5.25% for Super-Prime regional. Occupancy in Manchester, Bristol and Glasgow is at 98%+ as all are undersupplied. 17% of all beds, and 24.4% of private stock, are priced above the maximum maintenance loan now. That’s from 3.7% in 2016/17 - and once again, is a warning about sustainability in my view. This is dramatic affordability erosion. At this rate, though, if numbers only grow 1% annually, there will be 1.9 students per bed by 2030/31, due to the nature of the market at the moment. A lot of “transferable” stories to the wider market here - but, if development isn’t viable, what are you supposed to do about it? Last report, then, before I get on to the Bank of England efforts for the week. A sector I am more involved in and lean into a little more on a monthly basis - the ageing population. Age UK discussed “how the shortage of suitable housing affects our ageing population”. We saw earlier on that the increased numbers in temporary accommodation are actually over 65s. Let’s see what the experts have to say. Generally - it might not surprise you to hear that the core message is that the housing system is failing the ageing population as well. Millions are unable to move, and/or live in properties that make ageing harder. This puts more pressure on the NHS, social care and local authority budgets - so there is an economic case for sorting this out alongside a moral one. They address the big assumption up front - older people do move more than assumed. Nearly half of those aged 66-74 have moved since turning 50, but most don’t find homes suited to ageing. 59% of 75+ never expect to move again - barriers are practical, emotional and financial. 44% of over-50s worry about affordability, 41% worry about condition, and 43% worry about accessibility. What would be suitable? Step-free, warm, efficient, adaptable and close to amenities. Only 12% of households over 75 have step-free access, and 2.3 million over 55s live in “non-decent” homes (doesn’t meet the four criteria under the decent homes standard). Next up, it won’t surprise you to hear that those in the PRS and those with low incomes (which correlate) are hit the hardest - 65% of 66+ private renters have affordability concerns, and 48% of 66+ homeowners with incomes under £30k worry about condition. Adaptions take nearly a year to deliver under the Disabled Facilities Grant process, which is a major barrier to independent living. Again, it won’t surprise you to hear that women, carers and ethnic minorities are disproportionately affected here - lower lifetime earnings, longer life expectancy, and tenure inequality are cited. Then - onto what is different. Over 90% of older people live in mainstream homes, so specialist schemes remain exactly that. Under-occupation is overstated, according to this report, because 80% of o-65s already live in a 3-bed house or smaller (there’s an issue here that’s obvious. Having 3 bedrooms when you only need 1 is the definition of significant under-occupation, not 1 spare bedroom but 2). However, the report wants to talk about usability, not size. Too few homes are accessible, adaptation is too slow and retrofit planning is insufficient. Then another one of those head-wobbling stats - by 2043, households headed by over-65s will make up 84% of all new household growth. Wow! The argument here though is that the problem is accelerating. So - what’s needed according to the report? Age-friendly design should be a national housing priority. NPPF needs amending to require explicit assessment of ageing needs. Mandate Part M4(2) accessibility standards for new homes (oh yay! More regulation! You will see where this is incongruent with many of the other reports). Social housing renovation needs to “embed accessibility and energy efficiency” (remember social is way ahead of PRS/OO stock, 75%+ is C+ versus just under 50% in the other tenures). Integrate retrofit and adaptation policy (sounds like a sensible idea). Reform the Disabled Facilities Grant. Ensure older renters are protected from rising energy costs. Fund local enforcement and expand home improvement agencies nationwide. And regenerate sheltered housing, to boot. You see just how much of this is about more bureaucracy and more regulation, and that’s unlikely to help achieve anything - and that remains to be the problem. The evidence looks overwhelming that development is nearly regulated out of all existence at this time. I don’t think what Labour had in mind, with their 1.5m homes, was to make it so hard that only massive developers or local authorities could build? But that’s what we are seeing at the moment. All of the “solutions” here, pretty much, make it harder. That’s not to knock the ageing population (look, we are all part of it, right?) or Age UK - but more the attitude of the way we think we should go about things in the UK right now. I’d like to see a lot more about the economic argument of how to save the NHS/social care system money, and allocating that money via grants rather than via excessive regulation, personally - and I think that would be a lot more effective. I said it last week - more and more I read these reports and realise how they don’t actually understand how to GET THINGS DONE. Frustrating, because the cause is just - but economics does not have room for the moral argument, because resources are scarce (and are spent in the wrong areas all of the time!).

A damning assessment across the board of the new building situation throughout the country - not just London (although my goodness, it looks mortal there) - although London is what attracts the attention of Westminster in terms of shaping the experience of the decision makers, it is also handily “disposable” in terms of the Mayoral authority (and there’s limited “warmth” between Khan and Starmer, I think it would be fair to say). Smaller cities, houses for the ageing population, first time buyers - everyone is screaming to an extent, and everyone is (as always) pushing their own agendas for the groups they represent. That’s politics!

How about one of the key variables mentioned in dispatches here - the interest rate in general? There appears - to me - to be even more divergence forming between members of the Monetary Policy Committee based on speeches from the past couple of weeks. The Committee meets again on Thursday 6th November, and it is the last “significant” meeting of the year, with the updated monetary policy report. Changing rates on a “non-report” meeting has not happened for over 2 years now, when we were “on the up” in terms of the interest rate cycle (and, indeed, when 5-year bond yields hit their high for this cycle - June 2023). I perhaps don’t need to remind you but I will - the last 2 cuts that HAVE happened were 5-4 cuts; the last “consensus” cut was back in February where the vote was 7-2 (November 2024 was also 5-4, and August 2024 - the “first cut is the deepest” - was a 6-3 vote). The February vote was not REALLY 7-2 - it was an emphatic cut, because the 2 voted for a 0.5% cut not a 0.25% cut, so it really stands out as the biggest consensus vote for a long time. So - there’s plenty of resistance at the most recent stages when it comes to rate cuts. Therefore, you might think, perhaps don’t worry too much about what those 4 people are saying or doing, as they are ultimately in the minority when they do agree to cut. However, I also wrote some months ago about the first divergence for many years between the Governor and the Deputy Governor for Monetary Policy. You get the overall sense that this really is marginal (and it is, there are good arguments on both sides) and there’s significant fragility - which there is! This next meeting is before the budget (in 2024, it was after the budget). That’s yet one more reason to hold off on cutting the rates, to be honest, because the markets are quite openly nervous in my view. They can’t be blamed for that - ultimately Rachel Reeves has “not yet” won the trust of households or business, in the round - primarily because of actions in the 2024 budget, and she will again be breaking promises in the 2025 budget; promises not to raise taxes again. Another pattern, though, if you want to look for them - the last 5 meetings that have been accompanied by a refreshed policy report have all ended in a cut. So - this one should be a cut too, on the balance of probability? I don’t think so, though. In recent months inflation has ticked upwards - next week we have September’s number, and it is widely accepted to be quite ugly. The economists’ best guess is 4% for CPI, and 3.7% for core inflation, as I write this. I think it starts with a 4, for sure. Just one year ago, September 2024 CPI printed 1.7% and whilst that was a little flukey/down to base effects, 4.xx feels a world apart from that! Let me do a quick reminder of the players: Dhingra and Taylor can go together. Both externals. Both committed doves - they basically vote downwards. Dave Ramsden - internal (Deputy Governor for Markets) - has proven to be the next-most-dovish - can certainly be persuaded to vote for cuts. The in-betweeners (no briefcase, or maybe there is) - the Governor (which is the right position for the Governor to have, in my view) - Lombardelli - and also Breeden (the Deputy Gov for financial stability). Next up you’d then have Catherine Mann - an external. She has switched positions, but also shown she is more willing for larger moves in rates (0.5%s where needed rather than very steady 0.25%s). Then I’d have Megan Greene - definitely more hawkish but can be moved to cut. The most hawkish is Huw Pill (chief economist) - who should be one of the very most influential on the committee. His only vote to cut has been in February 2025. So - what have they all been saying, and how does that start to form our expectations for 2026 and beyond? In the past few weeks, all the committee members have been out making speeches (as they do). Starting with the committed doves, you’ve heard exactly what you’d expect. Taylor is warning of a bumpy landing if inflation falls below target too soon. He just must not be looking at core inflation is all I can say. Dhingra doesn’t want us to be “overly cautious” in cutting rates. She sees many inflation drivers as temporary and so faster cuts can be justified. Let’s pause at this point because I think that’s nonsense. Don’t get me wrong, both of the aforementioned are “proper” economists, preeminent, incredibly well qualified. But look at the evidence. Wage rises are STILL nearly 5%, in spite of us being told they would be below 4% by the end of the year, and in the face of redundancies and rising unemployment! Construction inflation is expected to be 16%+ by the end of the decade (pull the other one, it is bound to be higher than this - look at the extra regs in the pipeline including future homes, for example, so the inflation on the existing materials isn’t the only fruit here) - utilities have been all over the press this week with Miliband continuing to lie about energy bills coming down when all of the main players in the industry are pointing to 20%+ rises by the end of 2029. Food inflation is thought to be 5-6% by the end of 2025 and core inflation, in general, is nowhere near a 2% world. Pray tell - where is this quick drop in inflation coming from, unless we are to have a recession? We aren’t likely to have one just yet, either. It needs a catalyst, at this point. There has been disappointing economic performance - sure. Growth is lower than we would like. Tax is higher than we would like. Unemployment isn’t doing well, although a decent chunk has come from falling inactivity, which is rarely cited. Government spending, however, is driving growth and consumption spending is being driven by wage rises, especially in the public sector. Public sector employees - lower paid, according to common opinion, but the means are very close these days - 34.5k in a mid-2024 IFS study for the public sector versus the private sector at 36k, and far, far more generous pensions (and getting bigger pay rises at the moment as well) - but most of these pay rises are spent in volume (particularly the ones that go to the lower paid, because their “marginal propensity to consume” - how much of their extra money they actually spend - is always higher).

That’s the proper committed doves. How about Ramsden, then? He says wage growth is “normalising” - OK, Dave, it is down from the 7% days but we haven’t seen a lot of progress this year? Not that I want it or advocate for it to be below inflation - we are looking at the 1%ish in real terms region at the moment, and we want 1%-2% sustainably in order to improve living standards. The problem, my friend, is that it is only 1%-2% in real terms because inflation is too high! His “lean” towards dovishness is likely to manifest in voting to hold in November, in my view, and that’s the right play.

Lombardelli hasn’t been particularly vocal, and seems to prefer data to ideology. I like her already. Bailey - he has come out and said - rate cuts are still “expected”, but with a timing and pace that is “less certain” - with a hawkish lean. He is clear that policy needs to stay restrictive until inflation is returned “sustainably to target”. He also is quite good at dismissing some of the less certain trends such as higher long-term gilt yields - the tragedy, however, is that he doesn’t link this with the badly misguided Quantitative Tightening Bank policy that I discussed in serious detail last week! Andrew - 2 plus 2 is 4. Breeden next - doesn’t want to keep rates “too high for too long” as it will harm output and employment (well, that’s already happening!) - but she again refers to a temporary bump not a sustained trend (in my view, in the complete face of the facts - more on that in a bit). In many ways, what they all seem to be missing is a REAL long-term macro view, that should be being influenced significantly by the aftermath of the pandemic. They are not alone here - there is nearly no-one that wants to listen to me bang on about Covid and the aftermath any more. At least half of this is psychological, in my opinion; people had a tough time and they have put it behind them, and they want to forget it. However - it is, underlying, the root cause of much of the structural inflation that is now embedded within the system - the very structural inflation that everyone other than Andy Haldane, when he was the chief economist, totally denied the existence of, instead preferring the narrative I debunked for the nonsense it was at the time - transitory inflation. The gag - as good as it gets for “property economist dad jokes” - was that everything is transitory, it just might take 30-40 years to get through it. Right now, we are having some more transitory inflation, thanks to Rachel Reeves’ raising of employers’ national insurance. It forced prices up, but it was a one-off (although it appears to be a one-off for the year, rather than forever….) - so this can also be written off as transitory. Hmmmm. Here’s the problem - we were already struggling with core inflation, and so anything inflationary has a bigger impact than it would if we were at a steady state. We’ve never been at a core inflation steady state since 2021 - the cycle low is 3.2% for core CPI since September 2021. No-one seems to mention this. 4 years above the upper bound for acceptability for the key metric - and a completely sideways (and slightly upward, in fact) trend for core inflation in 2025. Here’s where I get frustrated. I’m not suggesting this is “obvious”, but this is exactly the sort of helicopter view a macroeconomist should be taking, no? Throw into the mixer that all the macro data we have on pandemics in history show a 1%+ “premium” on inflation over the following 30-40 years (yep), and we are back to one of my more famous soapboxes of modern times - we live in a 3% inflation world, and pretending otherwise is a nonsense. Anyway - finishing the roundup with the most sensible members of the MPC. Megan Greene I agree with more than anyone else, although I have a lot of respect for Huw Pill as well. Mann flip-flops a little bit much for me, but I do admire her presence and her speeches more than the others, to be honest. Megan Greene says that inflation “may be falling more slowly than expected” (depends what you expected, IMO) - and warned about assuming productivity recovery in the past week week, which is “true but unhelpful” with an upcoming productivity review likely in the OBR forecast which is incredibly important. Productivity is the number one most important factor to the growth forecasts, it is as simple as that - medium and long term. Mann - she has moved from recommending a 0.5% cut in February (very American-style, though) to being a “holder”, once again. She sees “no urgent need to cut rates just yet” - so we know where she is at. Yes - the labour market is weaker, but not falling off a cliff. She also looks closely at inflation expectations - because they inform behaviour - and she says policy MUST remain restrictive for longer to restore price stability. She’s right. She has in recent months used phrases like “Persistent hold” - and I think she’s nailed it, largely. That leaves Huw. He speaks more of a “slower pace of cuts”, and is talking about inflation becoming “embedded” - I think it already is, but he means “more embedded” I suppose. Inflation pressures are persistent - and they are - and expectations are now baked in, as Mann refers to. It takes a lot to change this, and it won’t be fast. Remember. This all impacts the 2-year mortgage rate a fair bit more than the 5-year rate, because it is the short-term (3-month) rate that is essentially set by the Bank of England. The longer term is not so impacted at all by the base rate - but it is massively impacted by the QT policy (sorry to mention it yet one more time, but it is true!). Rate expectations dropped this week for 1 year’s time - because the unemployment numbers were poor and the US bond yields dropped, down to 3.5% - that’s 2 cuts in the next 12 months, which looks about right or perhaps hopeful. I think I would be at 1.5 cuts as at today, because I’m not convinced about inflation going away quietly, and I need to see something change that has not changed thus far in 2025 when it comes to the core.

Too many soapboxes, too little time. A real well done this week if you got to the end. Are rates going to drop substantially in 2026? It looks highly unlikely, without a black swan. But there’s a few swimming around these days, some of which the UK are just in no control of whatsoever - but if you are still sitting and waiting for lower rates, do yourself a favour and sort out any variable rates that are “hanging”.

Now - as I draw this week to a close, the next workshop is prepared, and as we turn our eyes to 2026, the next workshop is online and available! We start the year with a bang, discussing strategic planning and how to get the most of the next 12 months, with some of our own methods and takes on productivity and time management, alongside systems and processes. The other half of the workshop is about the most common pain point in SME property businesses - accounts, bookkeeping and group accounting. This is about measuring asset performance - not “how to use Xero”, but “how to make the most out of financial information” - what should you be seeing monthly, and how should you interpret it properly and use it strategically to grow your business, safely but quickly? As always we have real life case studies about our own experiences, and close with our “no-holds-barred” Q+A. Anything individual to consider? Get a VIP ticket and join us for dinner, in a smaller setting with an opportunity to discuss any specific roadblocks or issues in your property business at the moment. Join us! Thursday 22nd January 2026; https://bit.ly/pbw9 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 and beyond - the landscape has been set for a surefire bull run. It will be slow(ish), and take a little while longer to get off the ground - and the amount of stock around is still keeping things suppressed at the moment - but as the market continues to improve slowly, it is a case of “here we go” in my opinion.

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