Sunday Supplement 31 Aug 25 - Ring my Bell

“The Bell never rings of itself; unless someone handles or moves it it is dumb.” - Plautus, Roman playwright. This week’s quote again looks forward to the deep dive - the Bell in question is Torsten Bell, government minister advising the treasury on the upcoming budget. Time for the microscope, Mr Bell. Before we go into this week full hammer - Rod Turner and I will be running our next Property Business workshop on Wednesday 1st October, in London - subject matter this time is Investment, with an emphasis on what metrics you really need to be considering to run your property business properly, and building your business to scale. We’re digging into the real fundamentals of property investment for growth—from proper valuation and strategic debt structuring to the investment metrics serious pros use (hint: ditch ROI and yield). Learn why some deals work for some and not others, how to manage risk as your portfolio scales, and when to shift gear from side hustle to scalable business. We’ll break bottlenecks, build strategic pillars, and unpack real-life case studies of fast company growth. How have we done so many deals? We’ll tell you! Book the SUPER EARLY BIRD tickets with 20%+ off, now: http://bit.ly/pbweight Let’s plough on with Trumpwatch. What’s gone on in the USA this week? His moves to get tougher on crime versus illegal (or legal) migration have gone down well, improving his polling - sending the national guard into Washington, D.C. The sacked Federal Reserve Governor Lisa Cook has filed a lawsuit - setting another precedent here. There will be a preliminary court hearing. Questions were of course asked about the actual independence of the Federal Reserve (just wait until there’s a Trump symp in charge of the Fed next year……) Eyes were on the White House as Trump met with Blair to discuss a postwar reconstruction plan for Gaza. It must have been an interesting conversation. The migration medicine for the week was shortening foreign journalist visas from 5 years to about 8 months. GDP growth was updated for Q2 to 3.3% annualised after their disappointing Q1, when the economy went backwards 0.5% annualised we are told. This led to yet another stock market high, and yet another swathe of predictions of when this bull market would be over (along with a few voices saying there’s plenty of runway yet, particularly if interest rates are to come down by hook or by crook). The labour market is looking a little soft with poor jobs numbers; consumer confidence also fell. There’s been an overall path downwards for 30-year mortgage rates (but they are still at 6.56%) - a 10 month low, unlike the 30s in the UK - but the housing market remains jammed up, with sales falling. Cuts became more likely at the September Fed meeting according to Fed commentary (or the market’s interpretation of it) - mostly based on a weaker economic outlook, so not dissimilar to the UK situation at the moment. Do you really want rates down at ALL costs is the trillion dollar question? There was a recent poll about the approval rating for tariffs - 61% of Americans disapproved. Only 15% actively supported it. Some agricultural states are experiencing layoffs and that’s not helping with economic anxiety. We press on. The real time UK property market. Chris Watkin delivers once more - Week 33 in the can. Listings printed 33.4k, edging up a touch as we get to the end of the school holidays, and we are now only 3.3% higher than 2024 and 7.2% higher than the pre-pandemic market in terms of listings year-to-date. My “10% more stock than a normal market” ready reckoner is still working on the back of circa 2 years of overperformance in listings compared to historical averages. We are 11.3% 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. “Only” 20,300 price reductions in week 33, 14.1% being July’s official number, with 14% reduced in June, compared to last year’s 12.1%, May’s 13.4%, and the 5-year average of 10.6%. More stock, more reductions - absolutely and relatively. 33% more reductions than the 5 year average, if you take the difference between 14.1% and 10.6%. “25% more reduced properties than a normal market” also works as a ready reckoner. One in seven properties on the market are being reduced each month (so we are currently running at perhaps 90 to 95 thousand price reductions per month, to be clear!). Can’t find a deal? Just keep the legwork up and you’ll get there. You don’t tend to see 14%+ of stock being reduced in strong markets, by any stretch. Holidays have slowed things a little but sideways pricing continues……. 25.3k homes sold subject to contract, nudged up slightly. The 2025 average is 26,400. Healthy is still the best description. SSTCs are up 6.8% year on year and 14% on 2017-19, and still nearly keeping pace with 2022 (which to this point was a very hot market indeed). With SSTCs up 6.8%, whereas listings now are only up 3.3% on last year, this signifies more transactions 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. We went into August with 763,178 homes on the market - around 5k up on July’s number. 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 July 2024, 716k were on the market. These are more “higher high” numbers and so the “flat” feeling as I’ve been saying for some time now will likely continue to manifest itself in a steady market without much excitement as we get through the school holidays. It’s the second month in a row of not moving too far forward though - fewer than 1% more homes on the market compared to the month before - it feels like we are nearing or are already at the peak? We can’t read too much into August’s activity anyway but there’s always an extra surge in September when the school holidays are over, alongside a clearout of “no-hoper” stock where vendors mostly can’t take the medicine that the corporate agents are trying to prescribe for them - so we likely need to see those figures before drawing conclusions, as they could be somewhat different this year with just so much stock out there. Chris also looks at the per square foot on sold STC properties - it has a very strong correlation with prices that hit the land reg in 5 months’ time. This time round - July was at £344.78/sqft and that was 1.97% higher than July 2024 and 3.85% higher than July 2022. It was down around half a percent on June’s SSTC number of £346.45, I think we are holding on to about a 2% - 2.5% up market for 2025, a little under my prediction (3.75%) and also below inflation, wage rises and the likes. At the risk of the broken record - sideways, sideways, sideways. Fall throughs trickled back above the long-term average of 24.2%, printing 24.3% - relatively normal “noise”, there’s still been very little volatility around the long-term average for many weeks now. The net sales are still there or thereabouts - 19.1k, 5.6% up on last year and 10.6% higher than 2017-19 - not quite at 2022 levels (about 16k behind, now, total) but let’s see where we get to by the end of the year - I think it will be a close run thing on transaction volume compared to 2022 in a much less volatile year. 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

Over to the Macro-Mismatch that seems to plague the UK fiscal and monetary policy at this time. A VERY quiet week, with all the action starting on Monday. We will take a look at the MHCLG Right to Buy statistics for the 2024-25 fiscal year, as they are just out. The ONS released their household cost indices for Q2, so we will also take a look at those. Rightmove’s asking price index couldn’t be squeezed in last week, so I'll take a look this week. At the end - yep, gilts and swaps, but you knew that, right?

Right to buy. You remember it - lightly talked about these days. The total ticker now? 2,036,848 homes bought under right to buy since 1980 (until 31st March 2025). A lot of concentration very early on in the days of the scheme. Far, far fewer homes bought now under right to buy. The annual average (and that doesn’t really work when you look at the concentration, but nevertheless) over that 45 year time period is a little over 45k homes per year. 2024-25? 7,494 homes sold, and 3,593 replacements. 48% of homes replaced. The 7,494 was up 7% on the previous year. The replacements were up 4%. The average receipt per dwelling? £106,500, which wouldn’t be deemed a particularly high price to pay for a house these days I’m sure you’d agree. Sales have dropped from the more recent 10k-12k levels after the maximum discount was tweaked downwards. In this year 40% were new starts, 60% were buybacks (of ex-local authority properties, mostly, I would wager). And so the cycle repeats. This is likely because building has become so expensive particularly for local authorities. The “one-for-one” replacement target fell a few thousand more behind, as you can see, this year. The replacements are about 25% 1-bed, 43% 2-bed and 32% 3+ bed (Since 2012). This compares to sales of 14% 1-bed, 33% 2-bed and 53% 3+ bed. You can see what’s going on - not just a loss of units, but a loss of the size of what gets bought. You could argue however that there are demographic shifts to smaller households which justify that, but you can see the pressure on 3-beds and above is not being removed by replacement, especially if you only replace 48% of sales. Moving on to household costs. A different measure of inflation, basically, and they were up 3.9% to June 2025 according to the ONS (the figure to March 2025 was 2.7%). A significant spike. In this report they split households by decile - the “low-income” (decile 2, so between 10% and 20% in terms of income) were up by 4.1%, compared to 3.8% for decile 9 - close, but still harder in percentage terms on those with lower incomes. Private renter households had household cost inflation of 4.5% (a reflection of rent increases), social rent households experienced 4.4%. Outright owners were at 3.4%, mortgaged owners at 4%. Working households saw costs up 4%, versus retired households at 3.8%. Those with children were also a tick higher at 4% versus 3.9% for households without children. The point of these inflation figures is to complement CPI/CPIH as a measure of inflation, and give us more insight as to where the pressure is on households. The graph, which I’ve used as this week’s image, tells us what we already knew I think - household costs are up above inflation and have been throughout this inflationary cycle. It’s clear the gap has narrowed (but when CPI is 3.8%, anything above that is painful of course). Where does this fit in with my ongoing analysis - well, the way I’ve been framing it in the Supplement and also in presentations that I’ve given is “however and wherever you live, it has become a lot more expensive to run a household” - and with the graph, you can see how much more expensive. Don’t let things get out of kilter - because wages have moved upwards significantly - but this is a good representation of the size of the problem. Rightmove’s asking price index? The typical “August drop” happened, and created some headlines since asking prices are now down 3 months in a row, and some are pretending it is some kind of canary in the coalmine. It isn’t. I often point out how the rightmove index has asking prices around the £370k market (for 2025) versus house prices recorded on average at Nationwide, Halifax and the ONS between £260k and £300k. There’s a huge, huge gap there so when a market becomes more “realistic” (and I’d say the agents have absolutely caught on to that) then there is going to be more flex in the asking price dropping. Year-on-year asking prices are up a mere 0.3%. First-time buyer stock is down 0.4% in asking price, compared to the more expensive “second-steppers” and “top of the ladder” as Rightmove calls them, at 1% and 1.1% up accordingly. To be crystal clear, these are asking prices on new listings (rather than Rightmove overall) - so, around about 100k homes per month or a shade more. How do Rightmove frame it? Buyers have the upper hand, new seller asking prices are £10k lower on average compared to 3 months ago - if you want to sell it, price it keenly, basically. Sales agreed in July were the highest since 2020 - so let’s not pretend the market isn’t functional - it has just found a way to cope with all of this excess supply (and the agent patter around the country is matching this). The Rightmove advice - act fast to reduce to find a willing buyer. Sales agreed are up 8% YOY, although homes for sale are up 10% YOY as I’ve been saying. 34% of homes are seeing at least one reduction during their marketing period. RM also says that the rate cut will help to boost activity - this one I’m not in agreement with, given what’s going on with the gilts and swaps. The 2-year rate is unmistakably down, however, and I do get bogged down in the 5-year rate because that’s what I use. The report concentrates on the much lower chance of another base rate cut this year (without really focusing on the fact that the past 12 months has seen no real movement in the 5-year rate, and we were at the stage where the ratio was around 2.5:1 5 year:2 year mortgages (that of course may well not be the ratio for first time buyers, many first timers seem to think in 2 year cycles, perhaps being optimistic). This month shows EVERY area down (but that’s much more of a typical August) - but London asking prices down 2.6%. Wales managed to break even (so technically not EVERY area was down!) - and were top of the shop. The YOY changes in asking price vary from 3% up in Wales and 2.9% up in Scotland down to -1.6% in London and -0.8% in the South West (and -0.1% in the South East). The gap between the average asking price for a first time buyer and what a single person can afford on a 4.5x average salary is smaller than it has been in the past decade - which is congruent with my recent analysis on just how cheap property is in real terms and in comparison to wages, in spite of what the rhetoric says. When London gets split into component parts, Westminster asking prices are down 7.9% YOY - compared to Richmond who dropped 4.7% on asking prices just in August but are still up 4.8% on the year. Much that correlates with recent analysis here from other sources. Onto the gilts…..you will have noted the headlines again - highest yields/lowest values on long bonds for 28 years, we had, after it being 27 years last week. More of the same. In the long run the bond market is clear - get inflation under control and demonstrate it, otherwise we are demanding a big term premium for longer dated debt. We opened around 4.16% on the 5y for the week, a big gap up from last week’s close (but it was a Bank Holiday on Monday of course, only in the UK not around the world!) - and then declined as the week went on, to close at 4.111%. Thursday’s close at 4.099% correlated to the swap close at 3.762%. The 30s - again a gap up to open at 5.615% and a close at 5.605% - so the yield curve moved a little steeper once again, it seems. The market appears convinced that 5.6% is about the right price at the moment on the 30-year gilt. I shared a headline this week that caught the eye that said the UK market is drifting without anchor, which made sense. With all that in mind, I had my eye on a deep dive about the prospects of an IMF bailout and a repeat of the 1970s. However, this is exceedingly unlikely in my view, because of the independent central bank and the free-floating currency. In France? Much more possible - similar malaise (bond yields cheaper), although inflation is under control, growth is anaemic and thanks to the ECB France do NOT have direct control of their central bank any more, of course, meaning that they are much more likely to need the IMF than the UK are. It is mostly navel-gazing and headline-grabbing, as the anti-Reeves sentiment continues. It’s no surprise, however, that it is going on, after driving one more stake towards the heart of the “non-working person” daring to make any money from investment. What I will go into is a few of the ideas that have surfaced this week, that have caused offence and some element of fear. I’m going to squeeze a portion of “Torsten Bell” into this, as well - if you aren’t familiar with the name, I have been reporting on him since back when he was the chair of the Resolution Foundation - now MP for Swansea, he’s the best-qualified economist in the Government frankly (including Reeves if we consider her true CV, of course). Firstly, applying national insurance to rental income. This is all the way wrong-headed. What should be happening - as I’ve said several times - is that employee’s NI should be scrapped. Income tax should be one rate (28% at the moment, at a multi-decade low but I appreciate other taxes are at highs) - this would catch ALL investment income including pension holders, which would feel a lot fairer. It would be a big money raiser. Higher rate becomes 42% and additional rate 47%, on current numbers. JUST isolate landlords and do it? Push rents up, of course. Remember RRB is about to be signed off and there are no rent controls within the bill (sure, there are ways for renters to challenge things, more effective than before, when it comes to increases, but controls there are not). Do it for everyone? Still a more likely shrinkage in supply, but if you sell up and put the money in the bank, you get the same treatment on the income. It sounds vindictive - because it is. However, landlords are surely used to this after the past 10+ years of vindictive, unfair, retrospective, money-hungry changes to the tax code. Tax revenue from the source could of course go down, if you ONLY make it about property. Likelihood of doing it? Limited, in my view, but it depends how popular it looked when it was floated. Certainly delighted some on the left, who see it as another way to re-examine rent controls - even they understand that stock will be sold off on the back of this. If we DO go back to the 1970s, and the Labour administration that few will remember fondly, there was an investment rate of tax at the top of 98%. Yes, 98%. The top rate of income tax was also 83%, bear in mind. Squeezing the rich until the pips squeak, was Denis Healey’s phrase. I probably don’t need to remind you about the winter of discontent, but this sets the scene as to just how Maggie Thatcher could come in and “drain the swamp” of these ideas which raised a limited amount of tax revenue (Just imagine how many loopholes were being exploited for a start!). The surcharge - which might co-incidentally be at the same basic rate of Employer’s NI, 8% - but Torsten Bell (who was stuck with pensions reform, before, but now has a much wider brief and I’m sure has Rachel’s ear and respect) suggested previously that levelling income taxes across income sources was a good, progressive and fair idea. Don’t shout too loud - but he’s probably right here. Employees NI is a horrific tax. I can argue for 20% or lower capital gains, easily, but arguing for 20% basic income tax when employees pay 28% - I struggle. It washes out above the higher rate level, so it becomes 42% instead of 40% (and 47% instead of 45% at the additional rate). No-one likes it going up - but Mr Bell does have a real point about fairness on this one. How about some of his other bright ideas? Align self-employed NICs with employed NICs. Raise dividend tax rates (this one fails on fairness when the company has paid 19-25% corp tax, although what it means in the real world is that people with small companies no longer extract via peppercorn salary and then dividend) - but any retirees who are small shareholders in listed companies would be receiving 60p in the £ on net profits (25% to HMRC corp tax, 20% on the remainder in dividend tax). Doesn’t seem that fair to me, if we are talking fairness. Mr Bell has also talked over the years of reducing the top rate of tax banding. Whilst you are at it, you could remove the personal allowance for all higher rate taxpayers between 50k and 100k, and get rid of the 100k cliff that currently exists. That would create a new but shallower cliff at 50k, and stop the wastage that is occurring around skilled and highly motivated people working jobs of over 100k not pressing on because the 60%+ tax rate they face at that level is unfair. Broadening the base for higher taxes is absolutely where we are going in the future - currently “only” via frozen tax thresholds, which I’ve been moaning about (apologies, analysing) since effected in 2021-22. He has indeed written of smoothing out the thresholds, so on that subject we are on the same page. Don’t have these silly cliff-edges. Agreed. Regular revaluations to council tax bands (like in Wales) has also been proposed, and also making it proportionate rather than banding (so council tax becomes 0.8% of the value of the property, for example). He has also talked about halving stamp duty - but he wants to finance that by lowering the VAT threshold, I warn you. Talking of cliffs - it is the greatest cliff in the game. Businesses turning over just under 90k. This one is a toughie. He’s suggested a 30k start - on the basis of digital tax these days, VAT compliance being easier - it certainly would help to level the playing field on many markets where there are lots of non-VAT-payers and it becomes a real barrier to scale. It would also be somewhat inflationary, in those sectors, because the non-VATable players would be shrunk by a huge number. At the reward of halving stamp (I bet the 5% wouldn’t be halved) - maybe. It isn’t his worst idea. What about his work on pensions? Well, he has talked about capping the lump sum drawdown, perhaps to a number as low as 40k. The rest would then be taxed at the marginal rate on drawdown over time, subject to income tax. Sneaky, but again - who is to say what is “fair” here, that is rather subjective. How about CGT? Well, all the figures tell us that if CGT goes up, it is not going to raise more money. People stop selling. However, he has mentioned factoring in inflation - so many recent gains would not be gains at all any more, after inflation in recent years! That is more like a reform than a rise, and might work, but the introduction of an “exit tax” when people leave the UK would likely be the most unpopular of all (although the general public might be hugely in favour). To introduce an exit tax, it needs to start at midnight on the day of the budget, just to be clear - anything else would be ineffective. Nasty? Yes. Politically motivated, mostly? Yes - it wouldn’t raise a huge amount. It would also change behaviour, of course. He’s also been associated in the past with a per-mile surcharge for electric vehicles of around 6p, to replace fuel duty. Fuel duty leaves a huge hole in the exchequer in the £25bn+ range as and when there are “no” ICE cars left on the road - whatever is done to replace it is politically challenging. I’m sure a nice market in disabling EV GPS systems would come into play! He’s also proposed linking road tax to vehicle weight (again - credit where it is due - this sounds inherently fair). His last one - well, I have to declare that I’m a big fan of this one. Scrap the triple lock on pensions. It is unrealistic, unaffordable, and it needs to go. Let them eat CPI, I say (to be clear, I mean still link pension rises to CPI, but with none of the other promises. The collar would be 0% just in case there was a time of deflation ahead of us). He suggests a smoother, earnings-based system - but this doesn’t go far enough, for me. Why should the rise be above inflation? You are just piling more and more pressure, each year, on the remaining workers, when you have a record number of people retiring and (gauging the current Overton window) a limited appetite to keep importing enough people to fill the gaps. Something needs to change there, that much is clear. As per a lot of the more political analysis though, I often end up in the same place. Some of these sound great on paper - genuinely fair, and raising more money which is needed to operate the NHS. Cuts aren’t coming in this parliament unless there is a genuine crisis - we’ve seen evidence of that. Cuts are absolutely needed, don’t get me wrong - I saw a screenshot of a property application this week where someone including their benefits (which included carers allowance and disability living allowance) had the same income as someone on a 42k salary, after tax. Something can’t go on, in that situation - because that person simply has no incentive to work, ever (if they are able) - but these cuts are not coming. I can already see Nigel Farage with a chainsaw before the next election. Hold that thought, folks. Before I do close, don’t forget to book your SUPER EARLY BIRD tickets to the next Property Business Workshop that Rod and I are running on Wednesday 1st October in central London. This time around - investment metrics and how to run your property business at scale. My favourite topic of all! Book here: http://bit.ly/pbweight 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 yields currently continue to improve, it is a case of “here we go” in my opinion.

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Sunday Supplement 31 Aug 25 - Ring my Bell

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