"There are early and encouraging signs of a mild zombie apocalypse, where higher interest rates and minimum wages have combined to kill off struggling firms and leave the door open for new, more productive ones to replace them." - Ruth Curtice, Chief Executive, Resolution Foundation (January 2026)
This week’s quote pertains to the deep dive, as ever, as I get into the first swathe of reports that talk about the sort of housing market and economy we are going to have in 2026, according to the relevant experts.
As the calendar creeps towards a new year, it’s a natural time to pause and tackle the biggest challenges that keep 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 - Central London - https://tinyurl.com/pbwnine
One more plea for ongoing feedback please - I had some superb feedback on the Supplement this week when someone who has been a long time reader informed me that she was finding things much easier to process since I’d started the iterative process of using AI to help me with clarity and structure, and brevity. Thank goodness, keep it coming please!
Trumponomics to discuss as always. I don’t see us not having to discuss the Donald until early 2029, if not beyond if his leaving of the White House is noisier than 2021 (everything else this time round has been “bigger and better”, after all). Aside from the Greenland rhetoric (remember, even if just to calm your own concerns, take Trump Seriously, but not Literally - repeat after me), there have been noises around further renegotiation on pharma tariffs so that the US drug companies have more access to British money to buy their newer drugs.
The £31bn tech prosperity deal is also still in the balance, as it continues to be used as a weapon. The US Supreme court is also set to rule on just how legal or not the imposition of unilateral tariffs is - just another chapter in this story, rather than a final one, I’m sure.
Where Starmer got “botty splinters” on the Venezuela situation, he has been firm (as firm as a blancmange ever gets, anyway) on the Greenland situation - Danish sovereignty reigns supreme. Trump wants something - others NOT to have it, the raw materials underneath, a mixture - he’d also love a big fat piece of land, the biggest “acquisition” for the US in over a century. I think acquisition is the right word, as well.
There was a classic Trump address that I also caught on Friday as the snow fenced us in here in Solihull (the hill did not look so soily, it just looked very white indeed). The “generosity” of the Venezuelans, gifting these 30 to 50 million barrels of oil (although there will be a market value transaction here, of $3bn or so, depending on just how many barrels, if reports are correct), and the big money that sits there ready to be made for the US oil companies (if they are to invest the $100bn - $200bn necessary to repair Venezuela’s rotted oil infrastructure). This sure is “drill, baby, drill”.
He turned his attention very much to domestic policy matters this week though, upsetting all sorts of corporate interests (as he is wont to do) - Credit card companies shouldn’t charge more than 10% for a year to “give people a chance” - Truth Social chat. 20-30% rates are a “rip-off” and this “affordability tour” as the calm commentators are calling it is a big part of keeping the Republicans in favour for the mid-terms. Pretty straightforward.
“Big” Bill Ackman, who has moved up in my rankings of Finfluencer/Future GOATs to listen to now Warren has “retired” to Chairman, called it a mistake on X before he deleted the tweet. Don’t upset the Big Dog, is the message.
High risk customers just won’t get credit, is the argument from the banks. You’d expect that to be true. Unless the Government subsidizes this somehow, then terms and conditions will be being activated all over the place. Good, some will say - predatory lending stopped. Bad - those who already have had credit problems in the past will not have the “luxury” of a credit card if they need a buffer at any point.
I have my own thoughts on this. The credit card system as a rule is broken. I personally use it extensively - at 0% interest rates. That’s been extremely lucrative in the past few years when at points I’ve had 0% interest for 3 years or more on day to day spending (and discretionary spending too). Inflation has absolutely battered those balances before I’ve transferred them for a very low fee or simply paid them off. I’ve “won” at that system - but at the cost of whom? Arguably, the shareholders of the bank - arguably, at the cost of those less financially sophisticated. (In the real world, whether I participate or not is totally immaterial - not even a pebble in a pond). But in aggregate, the offers at the top end would also have to suffer, surely.
The other point I have to make is around market interference. This is market interference (in general) of the highest order. Markets sometimes NEED interfering with, when there are negative externalities for the whole of society. That MIGHT be the case with credit, if we are comfortable saying that there is a swathe of the population who simply shouldn’t be allowed to get any credit - that’s more of a debate than a statement of any fact. I guess we might be finding out.
It does make you wonder just how much American companies might be sweating right now, and wondering who is next in the crosshairs. The investment funds, the hedge funds, the banks - who is next? It isn’t the first time Trump has tucked into these sectors, although this is more “surgical” than some of his previous statements.
When the Donald was doing his new year’s resolutions, there was clearly more on the slate too. The $200bn purchase of Mortgage-Backed Securities (MBS) by Fannie Mae and Freddie Mac (Government Sponsored Enterprises) - announced this week - in a move to frankly circumvent the Federal Reserve. He’s asked the question - if we can’t get the darned base rate down even with stooges in the Fed, how DO we get it down - and someone has answered. More interference.
This is - it is probably obvious - guaranteed demand. What does that do? Increase price - price of the bonds. What does THAT do? In this case, squeeze yields. The yield is the inverse function of the price of a bond - that is, as the price goes up, the yield goes down. What does this do? Lower the price of mortgages.
So - this is not dissimilar to a move I’ve suggested the Bank of England should take, last year, in an alternative to their disastrous Quantitative Tightening strategy. So it won’t surprise you to know that I’m in complete support of a move like this. Within reason, and within guardrails. The next question, then, is “how big is this $200bn purchase?”
Don’t get me wrong. $200bn is an unimaginable sum of money. But it is:
1.8% of the total MBS market - not nothing, but not material
66% of the volume of one single day’s trading - doesn’t sound too bad
Nearly 10% of the Fed’s total MBS holdings (9.5%) - so, a significant slice on top of what the Fed already holds.
44% of the Legal Retained Cap of Fannie Mae and Freddie Mac (so, without changing the rules, this isn’t going to happen again and again - but then in these situations, the rules tend to change).
These are long-term prospects, not to be frittered around. This price drop (to the lowest prices on these for some years) is because this is a genuine (and effective) shock to the system. Like anything, however, if you keep chasing the dragon, the effect will be lesser, and/or the cost of the same impact will be much more significant.
New homeowners, first time buyers in the US, will be delighted. This is an immediate saving of hundreds of dollars a month, potentially, for higher value mortgages and purchases. The Government’s stated target is to unlock those who are “imprisoned” by their lower rate that was locked in between 2009 and 2022-3, and make it much less costly and difficult to move (the vast majority of US mortgages are not portable).
Overall, as well, this should stimulate the US housebuilding and property services market - and also retail spending linked to home improvements. What’s not to like, then?
House price inflation, at a time where many think US house prices are already significantly overpriced - possibly. Also, if rates bounce back, and go beyond where they were - the taxpayer is ultimately carrying the can here. Market interference is also looked upon quite dimly as a rule - if this becomes anything like a regular occurrence, will the market players still participate? There’s a liquidity risk there. The last one? This is a “crisis” move when we are not in a crisis. In a way, similar but different to Biden draining the Strategic Petroleum Reserve when oil prices took a walk when Mr Putin took a walk into Ukraine in 2022. All hands to the pumps in non-crisis times. The argument from Mr Trump’s side, of course, is that this IS a crisis if “ordinary” Americans cannot move house. Having some sympathy with that view seems reasonable.
Then - to politics. Is this just meant to sound good - or is it actually meant to work? Because these sorts of measures might need to go a lot further to make a real difference. It does “sound” good to the person on the street, of that I’m quite sure.
There’s still talk of a stimulus cheque of $2,000 to Americans that “need” it - which is about as populist (and about as interventionist) as it comes. Coming “from” the tariffs. Again - clever in the way it communicates with the people.
One thing is for absolutely sure - Mr Trump knows he might have less than a year of full control (and beyond) because of the midterms, and he has come out of the traps with even more energy and vigour than he showed in 2025.
Now - it isn’t like the Labour Party are unwilling to interfere in markets. They have shown direct intervention via some fiscal policy in the last budget. Freezing train fares. Moving energy company obligation schemes out of the household bill and lowering energy bills directly. Again - I’m not necessarily against these moves (although using them to combat the inflation that they themselves caused with the National Insurance price hike on employers is ironic, to say the least). But I do get nervous, particularly if there’s cause to question the economic credentials of the people in charge (and I levy that across both sides of the pond, to be clear!).
One of the more fascinating Trumpwatch segments since the section started, early last year. So can we go back to the hot cocoa on offer in the good old UK - which, let’s face it - should be aggressively courting investment capital into its property market if there is not a “safe home” in the US any more (Blackstone shares dropped 5%, Invitation Homes shares dropped 7%, very quickly)? Since Chris Watkin’s data runs a week or so behind real time, there is no real time section of note this week. That will return next week.
The Macroscope is back to its best as 2026 really got started. The Bank of England Money and Credit report was out. The final PMIs for December were also released. Halifax released their final Index for 2025 as well, with more fuss caused by their final number for 2025. New year, same closing item: we still need to talk about the gilts and swaps, so that brings up the rear as always.
The Money and Credit report contained stable news. The very low volatility in month-to-month number of mortgage approvals continued - a variance of only 500 approvals printing 64,500 mortgage approvals for November 2025. The market seemed to keep calm while the budget was going on in the background. Remortgages grew by 3,200 getting back to 36,600 in November (this does not count product transfers remember, this is a remortgage at a new lender).
This really has been quite steady now for the past 2 years, after repair following a woeful 2023 for the mortgage lending industry (and the housing market in general).
The interest rate paid on new mortgages, which I like to keep an eye on, ticked up to 4.2% in November - the outstanding stock of debt is fixed at 3.9%, so the spread is still really quite narrow - and when they finally do cross, we can be sure than on average the market really has absorbed the normalisation of the interest rate. This particular year will see significant localised pain for some because they are coming off 2021 rates, which were the very lowest of all in the cycle, and going onto 2026 rates.
Business lending took a tick up too - still growing, at 7.2% annually for large businesses and at 1.9% for SMEs (finally moving forward on a continued basis, but slowly). It’s clear from these figures that SMEs have suffered more from the pandemic and the resultant policies that have followed, which would be congruent if you followed the stories in the media over the past week over the fate of pubs around their business rates (with the impending U-turn in the pipeline, one more time).
Large businesses are paying 5.64% on average, and SMEs are paying 6.18%.
Households took cover and hoarded funds at the largest extent since January 2025 - and possibly were more in the money after selling some assets off in fear more than expectation of the 2025 budget - the money supply is certainly moving forward, up 0.8% on the month.
It will find a home somewhere, that’s for sure - but the most watched number, the 65k mortgage approvals, is in line with a functional market that’s about level between buyers and sellers (which might explain the relatively flat pricing that’s been taking place, although as I’ve been arguing, it’s a market of two halves - cheap, and expensive).
PMIs were up next. Sadly, like the manufacturing PMI, the services and therefore the composite index slipped back below their hopeful flash prints from late December. The 52.1 flash print for both the composite and the services index fell back to 51.4 on each. That seems a bit more realistic, and is only congruent with the limpest of monthly growth - which is ultimately where I feel we are at the moment, and that is papering over the cracks of the pain in the private sector. Those prints were the tiniest steps forward from November’s final prints of 51.2/51.3 respectively.
What was the story? Lacklustre activity growth. Soft expansion speed. Lower than the average seen in H2 of 2025. There was a bit of a recovery in client confidence after pre-budget gloom which went on over an “extended period” (indeed it did, Rachel).
The story remains largely the same. Squeezed margins. Sharply rising business costs. Soft demand in major overseas markets. Concern over growth in the economy in general. Input prices rose by the most in seven months to see the year out. A pretty bearish report for a PMI print above 50.
No danger of that in Construction. Simply because the print is so far adrift from the 50-handle. 40.1 was the print - catastrophic, but up on the 39.4 in November. The second lowest reading since May 2020. Civils were in a bad way at 32.9, housing similar at 33.5, and commercial hit 42.0. Both of the latter moves were the greatest decreases since May 2020 once again.
The hope that exists in the sector at the macro level is concentrated on infrastructure investment in the near future. Business activity expectations for the year ahead actually hit a 5-month high.
So - we would expect a 0% or 0.1% growth month in December 2025, but can legitimately be underwhelmed by the “budget bounce” - although, bear in mind, it was December and many firms seem to give up about 70% of the way into said month……
Halifax rounded off the 2025 results for the indices, for the moment, until the ONS catches up. The one that made the headlines? 0.3% price growth for the whole of 2025. They slipped 0.6% in December, Halifax says.
Their commentary? Transaction levels were healthy (agreed) and the market remains “resilient” (more like it keeps calm and carries on regardless). Halifax’s punt for 2026? A 1% to 3% rise (let’s say 2%) compared to Nationwide’s 2% to 4% punt from last week.
Their regional roundup - Northern Ireland continues to storm ahead at +7.5% per year on the Halifax numbers. Scotland were in second at 3.9%, with Wales at 1.6%. They don’t even MENTION the number in England, but if it was +0.3% overall, I think we can conclude English house prices were very flat in comparison to the other 3 according to the Halifax.
The English regional spread they do comment on, though - North East +3.5%, North West +2.8%, and at the other end - London down 1.3% over the course of 2025.
So - no real new news there, and probably pretty reflective of the real world on the ground. Read an industry roundup for 2026, however, and there is plenty of positivity - and rightly so - agents don’t need a rising market to make money, they need willing buyers and willing sellers. And there seems to be plenty of both - so transaction levels look likely to remain quite healthy.
Last but not least, then. The gilts and swaps. Mr Trump’s aggressive interference as mentioned in the MBS market pushed yields downwards, and so the 5y gilt yield opened at 3.961% and closed at a haircut yield of 3.837%. Oh the joys of being tied to the US market when their yields are moving downwards! In the 30y market, an open at 5.269% yield closed at 5.118%, so 14 bps down or thereabouts compared to 12 bps down on the 5-year gilts. Happy days!
Now - a little recent history. This time last year, the bond markets were having a significant wobble. Labour were showing weakness (I know, imagine?) and 12 months ago the 5-year gilt yield was actually 4.55%. The swaps were (as I have been saying for some time now) more nailed to the floor - the 5-year closed at 3.58%, with the discount narrowing to 25-26 basis points, rather than the swap moving downwards any more. One month ago it was 3.665%, one year ago it was 4.147% but that wobbly period did not last too long.
The moral of this story for 2026 as I see it - don’t hold out for mortgage rates below 5.25% for limited companies - they are unlikely to come much further back down unless there is a really significant event that the markets currently are not pricing in, a grey swan or a genuine black swan. And - as always - be careful what you wish for on that front.
Still - a slightly shallower yield curve and lower yields. Overall, we will take that.
The Deep Dive this week takes a look at a couple of reports of interest. Firstly, industry relevant, is the Savills UK Cross Sector Outlook for 2026.
I’ve summarised in sections with relevant commentary (so that you can see more easily what is from the report, and what my thoughts are) - hopefully this format is useful.
Savills Spotlight: UK Cross Sector Outlook 2026 – The Propenomix Perspective
Right, let’s cut through the noise and see what the team at Savills are actually saying. They are calling for "realistic optimism" for 2026. After a turbulent 2025 where we saw more kite-flying from the government than actual policy delivery, they reckon we are turning a corner.
Propenomix Commentary: I am always wary when I hear "realistic optimism" from agents. We need to look at the data. While they are right that the geopolitical "stress" is a major driver, the real story for us investors is the spread between property yields and the risk-free rate (Gilts). If that spread doesn't widen, "optimism" won't pay the mortgage. Capital will follow lines of lesser resistance because effort (and risk) is not being adequately rewarded.
Macro View: The Calm After the Storm?
Savills forecasts a calmer environment for decision-making as we move into 2026. They are banking on a 50-basis-point reduction in interest rates, bringing the base rate closer to 3%. They argue this will narrow bid-ask spreads and bring vendors back to reality.
Propenomix Commentary: A base rate of 3% is historically “normal” post-2000, if indeed we do get there (I am not yet convinced), so let’s not get too excited about "cheap money" returning. The days of sub-1% are gone. What matters now is whether banks pass this on to borrowers or repair their margins that have suffered considerably since 2021. Savills mentions "pent-up demand" but demand is useless without affordability. Cash flow remains king here.
Comparative Returns: Chasing Income, Not just Capital
The headline figure is a forecast average total return of 7.8% per annum over the next five years. That is up slightly from last year’s 7.4%. The key takeaway here is the shift towards income returns. With capital growth likely to be muted until the economy really fires up in 2027, the heavy lifting has to be done by the rent.
Regional Winners: The North is tipped to outperform the South in residential total returns. This is standard for this stage of the cycle.
Commercial: Shopping centres are being flagged for institutional attention. High yields and low risk of new supply (because nobody is building them) make them a defensive play.
Rural: Land is expected to see stronger capital growth than previously thought as the economy recovers from 2027.
Propenomix Commentary: This aligns with what I’ve been saying in the Sunday Supplement particularly in the run-up to 2026. In a high-rate environment, you cannot bank on yield compression to make you rich. You need a hard cash yield today. The North outperforming the South is basic yield mathematics at work. It’s why I’ve built my portfolio the way I have. Risk management. As for shopping centres, that is a brave call for the average investor, but for institutions, it makes sense as a pure yield play if they can cope with asset management. Fears of turnover rents have been allayed which is what led to a lot of disposals in this sector from larger funds in the wake of Covid.
Commercial Sector: A "Gentle Slope" Recovery
Forget a V-shaped bounce. Savills predicts a slow grind upwards. They forecast commercial turnover hitting £55bn in 2026 (up 10%), with prime yields hardening by a modest 25-50 basis points.
Occupational Markets: The story here is robust but for the wrong reason. There is no booming tenant demand. It is a total lack of new supply. Development viability is still shot to pieces, so nothing is being built.
The "Prime" Trap: Tenants are being incredibly picky. Prime buildings in secondary locations are struggling. You cannot just buy a nice box in the middle of nowhere and expect a yield.
Sectors to Watch: Offices are their top pick (due to scarcity), and retail is seeing low vacancy in dominant locations.
Propenomix Commentary: The lack of distress in the market is fascinating. Lenders have been lenient, extending terms rather than foreclosing ("extend and pretend"). This means we haven't seen the flood of cheap deals we might have expected. If you are buying commercial, focus on the tenant covenant. If the tenant goes bust, you are left with an empty box and a business rates bill. In fairness - the valuers have managed the interest rate normalisation period well, rather than causing panic and mass repossessions.
Rural Sector: Food, Fuel and... Solar Panels?
Rural land is acting as a strategic hedge. Values have stabilised after dropping 5.5% for prime arable land, but the North saw values rise. The big story is the "Energy Transition". Solar developers are paying rents of circa £1,000 per acre, inflation-linked.
Propenomix Commentary: This is the ultimate diversification play. £1,000 per acre for solar sounds attractive compared to farming yields, but remember grid connections are a nightmare. Savills admits the grid is the bottleneck. It is "first ready, first connected" now. Do not buy land assuming you can slap solar on it tomorrow. When will this be sorted? 2030? If you listen to Elon Musk he remains convinced as he has been for many years that the sun is the answer.
Residential Sector: The Supply Crisis Continues
Savills forecasts mainstream house price growth of +2.0% for 2026, accelerating to +22% over the next five years. They expect a "bottom-up" recovery, starting in the more affordable regions.
Mortgages: The FCA has loosened the reins slightly, allowing lenders to be more flexible with loan-to-income ratios. This might unlock some capacity.
Rental Reform: The Renters’ Rights Act is the elephant in the room. Savills believes large landlords will absorb the regulation, while smaller, indebted landlords will exit.
Development: They rightly point out that the government's 1.5 million homes target is impossible to meet. Housing Associations are scrambling to spend grant money before 2029, which might stimulate land buying.
Propenomix Commentary: Finally, some honesty on the housing targets. 1.5 million homes? Never going to happen - and to Savs credit, they have professionally maintained this viewpoint throughout. The planning system has been broken for a long time and developers are mothballing sites because the margins aren't there. The Renters’ Rights Act is a classic case of unintended consequences. It is driving small landlords out, which reduces supply and pushes rents up. Bad for tenants, but for those of us who stay the course and professionalise, the rental growth prospects are strong. Supply is falling off a cliff.
Living Sectors: The Institutional Wall of Money
Build to Rent (BTR), student housing (PBSA), and senior living now make up 25% of all UK real estate investment.
BTR: Driven by Single Family Housing. Housebuilders are dumping stock to institutions to keep their cash flow moving.
PBSA: Occupancy is wobbling in some markets. Students are struggling with costs, and international recruitment is down.
Senior Living: Moving to a rental model.
Propenomix Commentary: Watch the "Single Family Housing" trend. This is just institutions buying housing estates that would have been sold to individuals. It puts a floor under housebuilder revenues but doesn't actually add extra supply to the market. For the private investor, this means you are competing with pension funds for stock. You need to be smarter, faster, or look where they can't go - smaller, value-add refurbishment projects. However - yields on these projects are just unattractive to retail investors - and don’t contain an awful lot of “edge” above the risk-free rate in my opinion, once they are up and running.
The Propenomix Verdict from the Savills report:
Savills is painting a picture of a market returning to normality. I would argue "normality" now means higher rates, higher regulation, and a desperate shortage of supply (that much we’ve known for basically 2 decades). 2026 will be a year for the brave, but only if the numbers stack up on day one. Do not buy on a hope and a prayer of capital growth; buy for yield and cash flow. Survive, then thrive.
In contrast, I also took a look at the Resolution Foundation’s first effort for 2026 - their New Year Outlook. The strapline - Early and encouraging signs of a mild zombie apocalypse (so don’t get too excited, or manage your expectations accordingly):
Resolution Foundation: New Year Outlook 2026 – The Propenomix Perspective
This is the Resolution Foundation’s annual tome. They are calling 2026 the year of the "Mild Zombie Apocalypse". No, not the walking dead, but the death of the zombie companies that have been clogging up the UK economy for a decade. It is a dense read, so I have stripped out the waffle to get to what actually matters for us as investors.
The "Zombie Apocalypse" & Productivity
The headline story is "creative destruction". The Foundation argues that the triple whammy of high interest rates, high energy costs, and rising minimum wages is finally killing off low-productivity firms. These "zombie" companies - the ones that have barely covered their interest payments since 2010 - are hitting the wall. Insolvencies are at their highest level since 2011.
Propenomix Commentary: I have been talking about this for years. Cheap money kept bad businesses alive. Now that money costs 5-6% (or thereabouts), reality bites. While the economists cheer for "productivity growth", for us on the ground in property, this means tenant instability. If your tenant works for a firm that has not made a profit in five years, worry. But long term? We need this. You cannot build a healthy economy on firms that only survive because borrowing is free.
The Labour Market: Reallocation or Pain?
As these zombie firms collapse, unemployment has ticked up to 5%+. The report frames this positively as a "reallocation" of labour from bad firms to good ones. They claim this is a turning point where we stop hoarding labour in inefficient sectors and start moving it to where it generates actual value.
Propenomix Commentary: That is a very sterile way of saying "people are losing their jobs". 5.1% unemployment is not a crisis, but it is a significant softening compared to the past 7-8 years. It puts a lid on wage growth, which brings me to my favourite topic: rent affordability. If tenants are nervous about their jobs, they don't bid up rents. We are moving from a landlord’s market to a more balanced one. Watch your void periods.
Public Spending: The Brakes Are On
The report notes that the state ballooned during the pandemic and the subsequent cost-of-living crisis. But 2026 is marked as the year the state stops growing as a share of the economy. The government is attempting to shrink the deficit, which means the "brakes need to come on" for public spending.
Propenomix Commentary: This is the "political economy" hitting the "real economy". The government has run out of other people’s money. For property investors, this signals that the era of handouts is over. Do not rely on Local Housing Allowance (LHA) rising to bail out your yield - we already know that this current Government is ideologically opposed to it. If the state is shrinking, the safety net is getting holes in it. You need tenants who can pay from their own earnings, not the state’s.
Household Incomes: The Crawl Continues
This is the grim part. Real household disposable income is forecast to grow by a pathetic 0.2% in 2026. That is practically zero. Why? Because while inflation has calmed down, wage growth is lacklustre and tax bills are rising. The "fiscal drag" (frozen tax thresholds) is quietly eating any pay rises people do get.
Adam’s Commentary: 0.2% growth. Let that sink in. If your rents are going up by 5% and your tenant’s income is going up by 0.2%, something has to break. This reinforces my view for 2026: do not budget for aggressive rental growth. If you push too hard, you will just get arrears. The capacity to pay simply isn't there. I personally doubt we will even see the 0.2% growth in RHDI, and am concerned over an ongoing recession at the household level for disposable income.
Poverty & Welfare: A Policy Victory?
The report celebrates a "triumph" for 2026: a sharp fall in child poverty. This is largely attributed to the government’s decision (in the previous Budget) to abolish the two-child limit on Universal Credit. They project child poverty will be 3.5 percentage points lower than it would have been otherwise.
Propenomix Commentary: A policy win, sure, but who pays for it? The taxpayer. It puts more money into the pockets of lower-income families, which is technically good for the bottom end of the rental market (LHA sector). But it is a transfer of wealth, not creation of wealth. It supports the rent roll in lower-value areas, but it doesn't solve the structural issue of low wages. It has also really and truly upset many working people who don’t see the logic of paying people to have children, and in spite of 40% of the recipients of this benefit being in work, they are focusing on the 60%. I’ve spoken in recent times of the issues of fiscal drag and higher taxation benefiting those on pensions and other forms of welfare - not a popular topic if you dare even breathe the word “pension”, but if you receive “net money”, you are comparatively better off as the workers get comparatively worse off, of course - and this affects the incentive to work (or the incentive to get classified as long-term unfit for work).
Demographics: Crossing the Rubicon
Here is a statistic that stops you in your tracks: 2026 is likely to be the first year in modern history where deaths outnumber births in the UK. We are entering an era of natural population decline, only propped up by net migration.
Propenomix Commentary: This is the long-term deflationary force nobody talks about. Japan went through this decades ago. An ageing, shrinking native population buys fewer houses and consumes less. If we didn't have migration, house prices could be falling in real terms on a permanent basis. Migration is the only thing keeping the Ponzi scheme of GDP growth (and housing demand) alive. Ignore the anti-migration headlines; the economy is addicted to it. How will the migration figures now re-adjust to the new world with fewer job opportunities in the UK, aside from anything else?
The Propenomix Verdict on the Resolution Foundation Report:
The Resolution Foundation is painting a picture of a "transition year". The drift is over, and the pain of adjustment is here.
The Bad News: Tenants are squeezed, incomes are flat, and unemployment is ticking up.
The Good News: The "zombies" are dying, which might actually leave us with a proper, functioning economy in 2027.
My take? 2026 is a year to be defensive. Cash flow is your shield. Do not gamble on capital appreciation when the population is shrinking (naturally) and incomes are stagnant. Stick to the fundamentals, keep your LTVs sensible, and for goodness sake, treat your good tenants like gold dust - because they are about to become a lot harder to find.
One final report summary to bring us towards conclusion this week. The Policy Exchange report released at the end of last year was a dense piece of work (pun intended) because it looks at building beautiful but dense buildings. Urban development is in desperate trouble in terms of viability, timing and the likes since the new “improved” building safety and fire safety regulations - and I’ve spoken of this at length last year. This is critical for adequate growth of our cities, economically, aside from anything else.
Policy Exchange: S.M.A.R.T. Density – The Propenomix Perspective
The Policy Exchange think tank has released a report called S.M.A.R.T. Density, and for once, it is talking some sense - though, as always, the devil is in the delivery. They are taking aim at the UK’s obsession with "tall buildings" and arguing that we have been doing density completely wrong.
The "High-Rise Fallacy"
The report kicks off by debunking the myth that "high-rise" equals "high density". They point out that London is actually one of the least dense capital cities in Europe (excluding the likes of Oslo). Paris and Barcelona achieve much higher densities without building 50-storey glass needles. They do it with consistent, mid-rise blocks (6 - 8 storeys).
Adam’s Commentary: I have been saying this until I am blue in the face. High-rise towers can be vanity projects for developers and councils. For investors, they can be wealth traps. The service charges in these glass towers are astronomical, the "sinking funds" are scary, and the running costs kill your net yield. Give me a red-brick mansion block any day. It holds value, the roof is simple to fix, and tenants actually want to live there. But can you build them any more if they are over 18m high?
The Solution: Mansion Blocks & Terraces
The report advocates for a return to "Gentle Density" - specifically, mansion blocks and terraced housing. They want this to become the "statutory default" for urban densification. The argument is that you can get the same number of homes per hectare as a tower block, but with better "viability" (cheaper construction costs) and less community opposition.
Adam’s Commentary: From a viability perspective, this certainly used to stack up. Building above 10 storeys requires complex engineering, cranes, and expensive materials. Building 4–6 storeys is standard brick-and-block work. The margins are better, and the exit strategies are clearer because you aren't reliant on overseas investors buying off-plan. Plus, mansion blocks have that "kerb appeal" that actually lets well.
S.M.A.R.T. - The New Acronym
They have slapped an acronym on it, of course. S.M.A.R.T. stands for Sustainable, Mixed-use, Aesthetic, Responsive, and Transport-oriented.
Aesthetic: They argue "beauty" is the key to unlocking planning permission. People don't object to new housing; they object to ugly housing.
Transport: Build where the trains are.
Adam’s Commentary: I usually roll my eyes at "beauty" in policy docs - it is subjective and usually means "more expensive to build". But functionally, they are right. NIMBYs block ugly developments. If you propose a Georgian-style terrace, you might actually get it through a planning committee. If "Beauty" is basically a bribe to get planning consent, or a proxy for support - use it.
Street Votes & Local Power
This is the controversial bit. The report pushes for "Street Votes" - allowing individual streets to vote on whether they want to densify (e.g., add a storey to their houses or fill in gaps) in exchange for a share of the value uplift.
Adam’s Commentary: On paper, it sounds democratic. In reality? It sounds like a nightmare. Imagine trying to get your neighbours to agree on the colour of the fence, let alone a major redevelopment. However, the principle of "value capture" - where existing owners get a slice of the profit - is the only way to stop NIMBYism. If Mrs Miggins at Number 42 gets a £50k cheque because the street allowed a new development, she might stop objecting. In a world beset with viability issues, however - where does the money come from for this?
The "Tall Building" Ban?
The report essentially calls for a moratorium on tall buildings unless they can prove they are absolutely necessary. They want a mandatory "Tall Buildings Policy" for anything over 60 metres, making it much harder to get them approved.
Adam’s Commentary: Good. As a portfolio landlord, I see the disaster of modern high-rise maintenance every day. The cladding crisis was just the start. Lifts breaking down, pumps failing - these buildings are liabilities in waiting and service charges are just unworkable and have grown out of control since Covid. A move back to traditional, mid-rise construction is good for the long-term health of the UK property stock, unless the new buildings are superior to what’s gone before on a number of levels.
The Propenomix Verdict
This is a refreshing read because it focuses on viability and product.
The Bad News: It relies on the planning system being flexible, which it currently isn't. "Street Votes" are likely to be bogged down in bureaucracy.
The Good News: It validates the strategy of buying in traditional, dense urban areas (Victorian terraces, mansion blocks). These asset classes are being highlighted as the "gold standard" for the future.
My take? We are stuck at 18m at the moment so “6-8 storeys” is a pipedream under current rules. If policy did shift this way, the "boring" mid-market stuff - your 1900s terraces and 1930s blocks - become even more valuable. They are the model for the future. Avoid the shiny new towers; stick to what has worked for 100 years. Yield is vanity, profit is sanity, but bricks and mortar is reality…..I worry the report is more idealistic than realistic, and with no mentions of 18 metres, the building safety act, the fire safety act, or any of the gateways, evidence would seem to bear that out.
So - as we get stuck into 2026 proper, the next Property Business Workshop is filling up. Early Bird ticket sales are in their last days of sale! We start the year with a bang, discussing strategic planning and how to make 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. Those dinner tickets are nearly sold out now, well done to those who have already booked on - there are 2 left as I write this - don’t miss out! It’s the best way to get a substantial conversation with myself, Rod and other experienced Property Business people - Join us! Thursday 22nd January 2026, Central London; https://tinyurl.com/pbwnine
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. Capital growth looks set to remain slow(ish) at the moment, although if you are in the right part of the UK, you will be well looked after by the combination of that plus inflation, the big bull run needs some runway first (although let’s see what the FCA and PRA do around easing lending requirements again) - but let’s have an amazing Golden Quarter together, it is a case of “here we go” in my opinion.