Book workshop tickets: www.tinyurl.com/pbwoct26
"The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics." - Thomas Sowell, Is Reality Optional?
The quote pertains to the Deep Dive, as regular readers will expect by now - and I make no apology for returning to big Tom Sowell, because there are weeks when only Sowell will do, and a week in which the presumptive next Prime Minister promised the biggest council house building programme since the post-war period is very much one of them. Everything in this week's Deep Dive is, underneath the policy language, an argument about scarcity: scarce land, scarce homes, scarce enforcement officers, scarce viability, scarce political will. And almost every proposal on the table, from whichever side of the aisle it comes, involves someone disregarding the first lesson of economics in pursuit of the first lesson of politics. Sowell wrote that line more than thirty years ago. It could have been filed as commentary on Monday's speech. More on all of that below.
So - Wednesday's Property Business Workshop. What a day. A great location in Central London, a properly engaged crowd, and a topic - due diligence, REAL due diligence - that produced some of the best questions Rod and I have had all year. The live DD exercise did its usual job of separating the polished pitch from the underlying reality, the live examples landed, and the no-holds-barred Q+A ran long because nobody wanted to stop. The VIP dinner afterwards was, once again, worth the ticket on its own. Thank you to everyone who came - you know who you are, and you were brilliant.
Now, the confession. At a workshop dedicated entirely to due diligence - a day spent teaching people to check everything, verify everything, leave no stone unturned - the one piece of due diligence that nobody performed at our end was on the England fixture list. Yes. We scheduled a due diligence workshop on the same day England played a World Cup knockout tie. The irony was not lost on the room, and the phones-face-down discipline was tested severely as the workshop split in an orderly fashion at 5pm. A useful lesson smuggled in for free: even the professionals miss the obvious check occasionally. Physician, heal thyself. Never again!
Which brings us neatly to the next one - and this time we have checked the fixture list. Mostly. The next Property Business Workshop is Thursday 1st October, Central Manchester, and the topic is a much sexier one, if I say so myself: JOINT VENTURES and MERGERS AND ACQUISITIONS - buying and selling portfolios and limited companies, structuring capital into deals, share classes, shareholder agreements, JVs from the experience of dozens of them (the good, the bad and the ugly), asset versus share purchases, and a closing case study on negotiating a disposal with your back against the wall. This is an interactive day, not death by PowerPoint, with myself and Rod Turner. Get your name down at www.tinyurl.com/pbwoct26 and make the most of the Super Early Bird tickets with a genuine 20%+ discount.
Welcome back to Trumpwatch. And this week I want to start with a birthday, because America turned 250 yesterday, and the administration marked the occasion in the most on-brand way imaginable: by opening a brokerage account for every baby in the country. The war thread, meanwhile, continues to cool - the memorandum of understanding between Iran and the US has now been signed, and oil has drifted back towards the levels prevailing before the conflict began - which matters enormously for the rates story later in this Supplement. And at home, the Labour leadership contest grinds on towards a conclusion that could put a new Prime Minister in Downing Street within weeks; I am parking the domestic politics until the Deep Dive, where it belongs this week, because the front-runner gave us rather a lot to chew on. Onwards.
So, the Trump Accounts. From the 4th of July - the 250th anniversary, a date chosen with all the subtlety you would expect - every American child born between the start of 2025 and the end of 2028 becomes eligible for a $1,000 seed deposit from the US Treasury into a new tax-advantaged investment account in their own name. Family, friends and employers can add up to $5,000 a year on top. The clever bit, and I do think it is clever, is the mechanism: the money must be invested in broad, low-cost US equity index funds - fees capped at 0.1%, no leverage, no stock-picking, no sector punts - and it compounds untouched until adulthood, at which point it rolls into a standard retirement account. Bank of New York Mellon is running the machinery, more than six million children were signed up by early June, the seed funding for the full cohort will run to around $14.3 billion, and Michael Dell has personally pledged $6.25 billion to put $250 into accounts for children in lower-income areas. Treasury Secretary Bessent has been touring the country claiming the seed money alone could be worth half a million dollars by retirement age if historical returns hold. Would I bet on that exact number? No. Is the direction right? Almost certainly. We should have been doing this years ago (we had a go with the child trust funds, but the Ts and Cs were not as spot on as these are - more on this below). It’s such a good idea for the UK, much more so than the US because we are so badly underinvesting in our own stock market as a populace and as a nation.
Why does this belong in a UK property and macro publication? Because the ripple has already reached us. Barclays published an analysis this week explicitly comparing Trump Accounts to our own Child Trust Funds - the scheme that ran for children born between 2002 and 2011 before being quietly killed off - and running the numbers on what a UK version would do for our capital markets. Their conclusion is instructive: the government seed money alone is a rounding error (a single cohort's worth would add about 0.02% to the FTSE All-Share), but if parents and employers contributed even half the annual limit, the market impact rises twentyfold and the child's pot ends up worth 26 times more.
In other words, the seed is not the point; the seed is the invitation. The behavioural nudge is the policy. Regular readers will spot why I have time for this: it rhymes with the argument I made a few weeks back about awakening the sleeping giant of British pensions - the country is not short of capital, it is short of mechanisms that connect ordinary households to compounding assets. The Child Trust Fund failed because nobody contributed beyond the seed. The American version has employers matching from day one. I suspect a British Chancellor - whoever that turns out to be by the autumn - will be handed this file within the year. Whether they do anything useful with it is another matter entirely. We'll see. What are we missing? Rather than Trump’s guesswork on the new administration and an ideological distrust of Labour, what’s the best way to try and get the Orange Man onside without giving him an airplane or half a $Bill in crypto? Praise him. Look at this wonderful idea, the UK will be implementing it immediately, and thanks for the superb idea.
Right - the tariff front, because the second front I flagged last week now has a date, a mechanism, and a visible effect on the water. The US Trade Representative intends to impose tariffs of between 10% and 12.5% on around 60 countries - the UK explicitly among them, alongside the EU, China, India and Japan - under the banner of forced labour enforcement failures, with implementation expected near the end of July. That deadline is doing real work in the physical economy already. Global container rates have surged roughly 80% in the thirty days to late June on the Platts index, hitting their highest level in four years - which is to say the highest since the pandemic supply chain chaos of April 2022 - as importers front-load everything from Christmas decorations to furniture to beat the deadline. Note the correction to a claim doing the rounds elsewhere, incidentally: rates are at four-year highs, not all-time highs, and still below the 2024 Red Sea peak of $9,800 per container. Precision matters in this game. Another boost to the manufacturing figures that is a false flag, but we will take what we can at the moment (as long as we don’t ascribe actual success to it…..).
There is a sneakier mechanism underneath the headline, and it is exactly the kind of lag effect I bang on about. Shipping lines buy fuel on contracts that adjust quarterly. The Hormuz closure sent their fuel costs through the roof for three months, and those costs get passed to shippers starting this summer - after the strait reopened, after the spot oil price fell. So even as the war premium drains out of Brent, the war's fuel bill arrives in freight rates with a one-quarter delay, and freight rates arrive in shop prices with a further delay after that. The shooting stopped; the invoice is still in the post. I made precisely this point about inflation expectations three weeks ago and the freight market is now making it for me in dollars per container.
And folded into the same story: the USMCA - the US-Mexico-Canada trade agreement, the one Trump himself negotiated in his first term and hailed as the greatest deal ever done - hit its renewal deadline on the 1st of July, and Washington declined to renew it. The deal does not die; it drops into a rolling annual review, which is a diplomatic way of saying it becomes a permanent negotiation. The freight association people in Canada are calling it much ado about nothing, and in the narrow sense they may be right. But step back and look at the pattern, because it is the same pattern I described last week when the White House briefed that the digital services tax penalty would supersede existing agreements: deals with this administration are not banked, they are leased, and the lease is reviewed annually with the landlord holding all the break clauses. For a Britain that signed its own Economic Prosperity Deal last winter, the read-across is not comfortable. Which brings me to the next item.
This week we found out, in pounds and pence, what that deal actually cost. An analysis published in the BMJ by researchers at York, Liverpool and Christchurch put numbers on the pharmaceutical side of the US-UK agreement - the bit where, in exchange for three years of zero tariffs on British drug and medical device exports, the government committed the NHS to substantially higher spending on new branded medicines. The mechanics: NICE's cost-effectiveness threshold raised from £20,000-£30,000 per quality-adjusted life year to £25,000-£35,000 from April; the industry rebate scheme that clawed back excess spending cut from 23% to 14.5%; and an overall commitment to more than double spending on new medicines from 0.3% of GDP to at least 0.6% by 2036. The researchers' central estimate is a cumulative additional cost to the English NHS of £44.7 billion by the end of 2036 - £1.3 billion a year by 2028, rising to £8.8 billion a year by 2036 - and, if that money comes out of existing budgets rather than new funding, a modelled 229,000 excess preventable deaths over the decade.
The Department of Health says it does not recognise the £45 billion figure and points to spending review allocations; it has also completed its own impact assessment of the deal and declined to publish it, which is not the behaviour of a department sitting on good news. Now, modelled excess deaths are exactly that - modelled, and I would treat the precise figure with the caution all such projections deserve. But the structure of the trade is not in dispute: exporters got tariff relief, and the NHS is paying for it on a ten-year instalment plan. NICE's own estimate is that the higher thresholds buy only two to five additional medicine approvals a year. Whoever wins the leadership contest inherits this bill alongside everything else, and I would gently suggest that publishing the impact assessment would be a reasonable opening act. Too cynical? Perhaps. Standard Fare. It stinks, to me, put simply.
One more, briefly, because it lands directly on the cost of building houses: the UK's new steel trade measure went live on the 1st of July. Tariff-free import quotas are cut by 51% against the old safeguard regime - a total quota of roughly 3.2 million tonnes, softened from the 60% cut proposed in March - and anything above quota now pays a 50% tariff, double the old 25% rate, across 20 product categories including rebar, plates, sections and hollow tubes. Ukraine is exempt, contracts signed before mid-March get transitional relief until the end of September, and the whole thing is coordinated with an equivalent EU measure published the week before. The stated logic is sound enough: UK crude steel production has halved in a decade and the government has decided that defence and infrastructure need a domestic industry, whatever the cost. But the cost is the operative word, and it lands on every developer's bill of quantities. The construction materials price index was already up 5.4% year on year in May, with brick deliveries down 4.4%, and this measure adds a new procurement risk - quota access, country of origin, out-of-quota exposure - to every steel-heavy package. Hold that thought for the Deep Dive, where the small builders tell us what rising input costs are doing to their appetite. And the digital services tax stand-off I covered last week? Still unresolved, still a 100% tariff threat hanging over billions in exports, still no comfortable way out. My re-raise suggestion stands, and it will always stand. The way I’d deliver it might be different though - I’d do it over the phone. “O intergalactically powerful one (probably better to just call him Mr Trump), find a way that we aren’t involved in this. We can’t stand for these companies not paying tax on their profits in the UK. You wouldn’t. What would you do if you were me? If we carry on down this road, I’ll have to put the tax UP to pay for the tariffs, not down, and that will look bad for both of us.”
Phew - stepping away from the transatlantic churn, let's get back to the real-time UK property market, where the numbers do not care whose birthday it is. The shame and irony being that independence after 250 years is needed at this end, because we have far too much dependence on the United States.
As is customary, the portal numbers have been crunched and published over at Property Industry Eye, and Chris Watkin's data for Week 25 of 2026 is where it's at, as always. If you want to know how the macroeconomic gridlock, the leadership contest and the tariff theatre translate to the local high street, and the REAL property market on the ground, look no further. The headline Chris ran with this week - house sales faltering amid mortgage jitters and political turmoil - tells you the mood, and the mood is not wrong. But as ever, the detail is where the money is.
The June picture first, because we now have the four full weeks. Just under 99,000 UK homes went sold subject to contract across them - down 9.4% on the same period last year. Before anyone reaches for the panic button, the context Chris is always scrupulous about: that June total still sits above 2023's 92,000, though below 2024's 103,000. So the market has softened rather than stalled - the same honest verdict as last week, with one more week of evidence behind it. My own honesty check from last week also stands: sitting between 2024 and 2023, rather than between 2025 and 2024, IS a slowdown, and I would be surprised if it rights itself before the World Cup is done, given England are still in it and playing Mexico at the Azteca late tonight/early tomorrow, UK time. Major tournaments always slow the market; this slowdown, remember, was underway before a ball was kicked. The football is the excuse, not the sole cause - but we should get a little bump if the rates stay workable over the next few months - the bump might not come until September, of course. We will see.
The supply side, then - and here, for the first time in a while, something has actually changed. 35,400 new listings came to market in Week 25, against a 2026 weekly average of 37,300 and a ten-year Week 25 average of 35,300. Read that again: the weekly flow of new stock has come back to the long-run norm, more or less exactly (with the usual caveats that we don’t read too much into one month, let alone one week - but this will be a trend to watch over the coming weeks for sure). The year-to-date pipeline sits at 931,000 listings - identical, to the thousand, to 2025's pace, 4.7% ahead of 2024, and 12.7% above the pre-COVID 2017-19 average. So the cumulative overhang is still there - my ready reckoner of ten per cent more stock than a normal market remains, if anything, a shade light on the year-to-date flow measure - but the tap has stopped running faster than normal. The bath is still filling, not draining, as it does at this time of year - but the pace has been normalised. The watching brief will be maintained, fear not.
Whether that is sellers reading the room or simple summer seasonality, it's hard to say, and I would want a few more weeks before calling it a trend. The standing-inventory adage holds regardless: homes per branch in the low thirties against a high-twenties norm. There is more to buy than there normally is. That has not changed in a week. There’s a lot more in the bath than flows in and out in one week, of course!
Demand is where the softness lives. Gross Sales came in at 24,100 for the week against a ten-year Week 25 average of 26,100 - below par again, the second week running, and the 2026 weekly average of 24,800 tells you the whole year has been running slightly cool. Year-to-date gross sales sit at 620,000: 6.6% below 2025's stamp-duty-flattered 664,000, but still 0.8% ahead of 2024, 11% ahead of 2023, and 7.9% above the pre-COVID norm. Net sales - gross less fall-throughs - were 18,600 for the week against a 20,100 ten-year average, with the year-to-date at 484,000: 5% below 2025, a whisker ahead of 2024, 12.4% ahead of 2023. And the completions layer beneath: 76,800 exchanges in May, with the year-to-May total of 365,000 running 5.5% behind last year - a gap almost entirely explained by the Q1 2025 stamp duty stampede. The Five Ds - death, debt, divorce, downsizing, and diddy ones - plug away week in, week out, entirely indifferent to leadership contests, tariff deadlines, or indeed penalty shoot-outs. People are still moving. Fewer of them than last year; more of them than the long-run past.
The friction metrics are, as usual, where the market's character shows. The gap between the average listing price - £442,000 - and the average asking price of homes going sale agreed - £375,000 - sits at 17.9%. A shade narrower than last week's 18.1%, and much closer to that long run 16-17% norm, compared to the 25% or bigger divergences we saw a month or so ago. People are coming to market at much more realistic prices than they were, it would seem. Price reductions also did their heavy lifting: 25,800 in the week across a 747,000-home national shop window, with 13.4% of all stock reduced in May against a 2025 average of 12.8% and a six-year norm of 10.7%. (June figures next week). The sell-through rate - the share of homes on agents' books that actually went sale agreed in May - was 14.6%, against a pre-COVID average of 15.5%. And the number that should still make every overvaluing agent wince: 45.2% of all homes that left agents' books in May went unsold. Withdrawn, delisted, given up. Nearly half. The £64k question remains what it has been all year: are agents winning the instruction, or winning the RIGHT instruction? Because the data keeps saying the same thing - price it correctly on day one and it sells; chase the valuation and you join the 45.2%. It still remains one of the most mind-blowing numbers that I ever quote from my mental rolodex.
The one genuinely reassuring friction number: fall-throughs. The rate sits at 23% against a decade average of 24.5%, and just 5.05% of homes sold subject to contract in May fell through - below both the 2025 average of 5.3% and the ten-year average of 5.8%. The deals that get agreed are sticking. A selective market, then, not a collapsing one - fussier, slower, but transacting. The probability-of-selling measure rounds it out: 54.8% of homes leaving agents' books in May exchanged and completed, against a seven-year average of 57.6%. Below par, not off a cliff.
On the £/sq.ft measure, which I rate above any asking-price index the papers will wave at you, May's agreed sales averaged £349.64 per square foot - 1.9% higher than a year ago, 13.2% higher than five years ago, and unchanged from the figure Chris published a week ago, which is what you would expect as the May data settles. The reason this number earns its place every week: it matches the Land Registry index with about 98% accuracy, five months in advance. Correlation, not prophecy, and direction rather than quantum - but fewer homes selling at higher achieved pounds-per-foot is a market getting choosier, not cheaper. Same verdict as last week; the evidence keeps agreeing with itself.
The rental side: the June average rent came in at £1,811 per month against £1,791 in June 2025 - so headline rental growth of barely one per cent, essentially backwards in real terms, which after the relentless climb of recent years remains genuinely notable. The year-to-date average sits at £1,753. And the supply picture underneath has not moved an inch: 305,000 rental properties available against 311,000 a year ago. Flat rents on shrinking stock is a tension, not an equilibrium - I said it last week and I will keep saying it, because the medium-term arithmetic in the private rented sector still resolves in exactly one direction, however politely the monthly averages behave. Hold that thought hard this week, because the Deep Dive is about to spend three thousand words on the man who wants to reshape that sector, and the Select Committee that just reported on it.
One personal note to kick off the appreciation paragraph: Chris's local focus in this week's show was Solihull - which, for those who don't know, is very much my neck of the woods. Chris - this is my weekly appreciation paragraph. Thanks for what you do! If you want some help positioning yourself as a local market expert - as an estate agent or any form of property professional - give Chris a shout! Either way give his channel www.youtube.com/@christopherwatkin a follow and some love, please!
Dust off the Macroscope, then. A proper quarter-end edition, this one, so let me tell you what's coming. First, the Bank of England's Money and Credit release, where mortgage approvals just did something they have not done all year. Then Nationwide's June index - with the quarterly regional tables AND the annual inflation-adjusted party trick that I look forward to more than is probably healthy. Then the final PMIs, my darlings of the real time economy, with the services sector now at its weakest since the start of 2023. And bringing up the rear, as the contract demands, the gilts and swaps - where two entirely separate dials have parked themselves at exactly the same number, and it is not the number the Bank Rate is set at.
OK. Money and Credit first, and the number the papers ran with is the right one for once: 56,205 mortgage approvals for house purchase in May. That is 15% down on April, 11% down on May last year, and comfortably the weakest print of 2026. Approvals for remortgaging fell even harder - down 35% on the month. Robert Gardner at Nationwide called it directly in his own commentary this week: approvals "fell noticeably" as the Middle East conflict, the energy spike and the jump in market interest rates knocked the confidence out of the spring market. So there it is: the mortgage jitters in Chris's headline, rendered in official statistics. What do we note? It had to happen, it took perhaps a little longer than we might expect, and our anxiety is calmed by the fact the war is “over” - as much as a middle east conflict is ever “over”.
But let me do the mechanism properly, because the timing matters more than the level. A May approval was an application written in March and April - which is to say, written into the teeth of the war, when Brent was north of $140, the five-year swap was at its worst, and every rate table in the country was being repriced upwards weekly. May's approvals are a photograph of peak fear. The completions data tells the other half of the story: HMRC counted 98,450 residential transactions in May, down just 2% on the month and 17% UP on last year's stamp-duty-hit base - because May's completions were approved back in the calmer window at the start of the year. The pipeline giveth with a lag, and it taketh away with a lag. Which means the transaction air pocket implied by that 56,205 is not behind us; it is ahead of us, arriving in the July-to-September completion numbers. Where do we want this figure to be? Somewhere in the mid-60,000s is a healthy market. We are a long way below that, and about to feel it. Next month’s release really is one to watch, because it will give us an idea of the scale of the damage - at the moment it is about 10-12k mortgages that it has cost us at the macro level, will that be all? It is unlikely to snap back to the norm in an orderly fashion with a single month as an outlier, let’s face it.
Two supporting exhibits from Threadneedle Street's own releases this week. The effective interest rate on NEW mortgage advances jumped to 4.23% in May from 4.08% in April - a fifteen basis point leap in a single month, which is the spring's swap-market damage arriving at actual completions, right on schedule. The rate on the OUTSTANDING stock of mortgages, meanwhile, barely twitched at 3.92% - the great fixed-rate shield doing its slow, grinding work in both directions. And the Bank's Credit Conditions Survey for Q2 has the lenders telling us what they see coming: credit availability unchanged in Q2 but expected to RISE in Q3, while demand rose in Q2 but is expected to FALL in Q3. Translate that from lender-speak: they have money to lend, margins they are willing to shave, and they are bracing for fewer people to want it. That is precisely the setup in which pricing gets keener - lenders competing for a shrinking pool of borrowers - and it is why I keep saying the mortgage market can improve even while the activity data gets worse. Hold that thought for the gilts section. Keep an eye out for improved 0% credit card deals, for those who fish in that pond!
Next up - Nationwide, and it is quarter end, which means we get the good stuff. The headline first: UK annual house price growth picked up to 2.2% in June from 1.7% in May, with the average price at £277,484 and prices dead flat on the month once seasonally adjusted. Gardner's framing was appropriately unexcited - a market softened by the war, the energy spike and the rates repricing, now looking at a possible recovery in coming quarters IF the energy shock keeps subsiding and IF, in his own carefully chosen words, "domestic political uncertainty does not adversely impact sentiment." A chief economist hedging his hedge with a hedge. A man after my own heart.
The quarterly regional tables are where the real information lives, and this quarter they are a two-tier map with the contrast turned up. All thirteen regions positive on the year - the first time I have been able to type that in a while - but look at the spread. Northern Ireland leads at 8.6% (average price £226,699), roughly FOUR times the UK rate, its border-region/post-Brexit boom continuing to the point where Nationwide devoted a whole section to the affordability consequences: a first-time buyer mortgage there now eats 31% of take-home pay, up from 24% in 2022, though still below the UK average of 33%, and NI prices have climbed from 70% of the UK average in early 2024 to 80% now - against a 2007 peak, lest we forget, of 125% (I still never trust those numbers, much as I never trust any transaction numbers pre-2008, frankly - there was just so much fraud going on).
Then the English north: North West 3.9% (top English region again), North 3.9%, Yorkshire 2.9% - and, the one I have been waiting for, the West Midlands at 3.2%, having printed precisely 0.0% last quarter. My own patch has finally decided to join in, and given Chris's local focus this week was Solihull, the stars have rather aligned for the Midlands reader. Scotland and Wales both at 3.5%. And then the south: London at 1.6% (respectable, by its recent standards), the South West at 0.7%, East Anglia and the Outer Metropolitan belt at 0.3%, and the Outer South East bringing up the rear of the entire table at 0.1%. Northern England up 3.1% on the year; southern England up 0.7%. England overall 1.5%, from 0.9%. Two housing markets, one country - the ONS said it, Chris's portal splits say it, the Bank's agents say it, and now Nationwide's quarterlies say it in the most granular terms yet. I have stopped asking WHETHER the divergence is real and moved on to asking whether it mean-reverts or whether it is a structural reordering. I still lean structural, for the reasons I gave a fortnight ago - a decade-plus affordability gap does not close in a couple of quarters - but I hold that view loosely.
Now the party trick, and forgive me (even though I am #sorrynotsorry), because I do this every quarter end and I will keep doing it until the conclusion changes: house prices adjusted for inflation. Nationwide's updated real house price series landed with the quarter-end data this week. The nominal numbers say prices rose 2.2% in the year to June. Retail price inflation over the same period ran comfortably above 3%. Which means that in REAL terms - in the only terms that matter for the long-run investor - UK house prices FELL again this quarter. Stack the whole series up and the conclusion I have been drawing for years now still holds: adjusted for inflation, UK house prices are around their cheapest since Q1 2003]. Let that settle for a second. Cheaper, in real terms, than at any point in nearly 25 years now. Holy Cannoli. This is the quiet mechanism I keep describing when I say the market is repricing slowly in real terms rather than crashing in nominal terms: sellers do not have to capitulate on the sticker price, because inflation is doing the discounting for them, a few per cent a year, every year, while the headlines report "growth". If you have been waiting for the crash, I have news: on the measure that matters, you have been living through it since 2022. The question is not whether property gets cheaper - it has been getting cheaper - but whether your capital is positioned in the part of the two-tier map where the real declines are shallowest and the yields do the compounding. And if you aren’t using leverage to make the most of this - what on earth are you playing at?
One bonus from the Nationwide research team before we move on, because it is directly actionable: their EPC analysis. For owner-occupiers, an A or B rated home commands a premium of just 1.6% over an equivalent D - about £4,500, barely worth the scaffolding. But for BUY-TO-LET purchases, the A/B premium is 12.2%. Twelve point two per cent. The investor market is already pricing the 2030 EPC C deadline into stock, years ahead of the owner-occupier market, and the spread between those two numbers is the regulatory risk premium made visible (more manifesting itself in the discount of the stock below C than a genuine premium above it, in my personal experience at the coal face). Regular readers of PropenomAIx will connect this straight to the Validity Lock-In and the Great SAP Arbitrage of 2029 - the certificates you secure under the current methodology before October 2029 hold their value for a full decade. The market has just told you, in basis points, that energy-efficient rental stock is a different asset class now. Worth knowing whichever side of that trade you sit on.
Onto the PMIs, my darlings of the real time economy - the June finals this time, and they largely confirmed what the flash told us a week ago, with the composite settling at 49.3 (the flash said 49.4; the finals shaved a decimal) for a second straight month below the 50 handle, the weakest reading since April 2025. Tim Moore at S&P Global called it "a clear loss of momentum" through the second quarter, which is the polite version of the treacle I have been describing for 3+ years.
Services is the story, because services is four-fifths of the economy, and the final reading of 48.8 - down from 49.3 in May - is the weakest since January 2023. Forty-one months. New orders fell for a fourth consecutive month at the fastest pace since November 2022, with respondents blaming the familiar cocktail: the war's after-effects, squeezed clients, and - there it is again, third survey running - domestic political uncertainty. Employment is the part that should worry Threadneedle Street: service sector job losses at their sharpest since February, redundancies and quiet non-replacement doing the work. The one true bright spot sits on the prices side - input cost inflation slowed to its weakest since March as fuel prices fell back, well off April's 41-month peak, and prices charged rose at their slowest since February as competition bit. Weak activity, cooling prices, falling employment: on any normal reading, that is an economy asking for a rate cut. Hold that thought for two more paragraphs. And a small delight buried in the anecdotes: consumer-facing firms said the late-June heatwave hurt footfall, while hospitality reported a demand boost from the World Cup. The nation is too hot to shop and too busy watching the football - a sentence that will date this Supplement precisely, and I am fine with that.
Manufacturing, meanwhile, continued its strange little counter-cyclical dance - the final PMI at 52.5, an eighth straight month of expansion, with output growth at a 21-month high. But the finals confirmed exactly the fuse I lit under this last week: the boom is stockpiling, not demand. New orders slowed to their weakest since December, export growth was the softest of its six-month run, several firms reported Middle East opportunities simply stalling, and Rob Dobson at S&P said the quiet part plainly - "sustaining the upturn is becoming a bigger concern" as the client stockpiling that drove the output surge starts to fade. Only 48% of manufacturers expect output growth over the coming year, against 53% expecting stagnation or worse. Delivery times are lengthening not because demand is hot but because supply chains are strained - shipping delays, port issues, tariff disruption, the very freight story from Trumpwatch arriving in the survey data on cue. Fear-buying dressed up as recovery, with the fuse now visibly burning down. I said it last week; the finals co-signed it.
OK. Time to get Gilty, or not Gilty - and this week the section has an unusually elegant hook, because two entirely separate dials are now parked at exactly the same number. Let me give you the raw material first. The 5-year gilt opened the week at 4.295% and closed at 4.311%; a year ago it stood at 4.006%. The 10-year opened at 4.749% and closed at 4.787%; a year ago 4.563%. And the 30-year opened at 5.461% and closed at 5.52%, against 5.358% twelve months back. So a modest drift upwards across the curve on the week - single-digit basis points at the front, six at the long end - with the whole curve still sitting meaningfully above where it was a year ago, when the direction of travel was confidently downward and the easing cycle was in full voice.
Read the shape, though, because the shape is the politics. The front end barely moved. The long end did the lifting, and a 30-year above 5.5% is the bond market's running commentary on the leadership contest: whoever emerges, the market is charging a premium for three decades of British fiscal promises while the identity of the promiser is unknown. I would be careful not to over-read six basis points in a single week - I said the same when the move was downward, and consistency demands it now - but the direction of the nudge at the long end has been one-way since Westminster caught fire, and nothing this week reversed it. Calm arrives with a winner, or it does not arrive at all.
Now the two dials. Dial one: the 5-year swap closed Thursday the 2nd of July at 4.00%. Not roughly four. Exactly 4.00% - down from 4.13% a month ago, though up from 3.59% a year ago. Dial two: the Bank of England's own one-year-ahead Bank Rate expectation, read off the forward curve, stood at 4.00% on the 2nd of July, down from the 4.07% I quoted you last week. Two independent instruments - one pricing five years of SONIA, one pricing where Bank Rate sits next summer - have arrived at precisely the same round number. And here is the thing I need you to hold onto, because it is the single most misquoted fact in UK property finance right now: the Bank Rate itself is 3.75%. It has been 3.75% since the final cut of the easing cycle back in December.
The 4.00% is where the market THINKS we are headed, and where Megan Greene and Huw Pill voted to take it at June's 7-2 hold. It is not where we are. The gap between those two numbers - 25 basis points of "prove it" - is the entire rates debate compressed into a spread. That’s come back a lot, and I can’t help feeling that the Governor will try to hold at 3.75% rather than getting to that 4% number if he can at all avoid it - whether that’s political pressure or just a really strong feeling on what signal it sends to the market to break this cutting cycle rather than having a pause (like everything “transitory”, these transitory periods can easily go on for a year or more - indeed, with inflation, we are on year 6 of “transitory” by my calculations…..). That seems to be Bailey’s current position - reading between the lines - although as the facts change, I am sure he reserves the right to change his mind - we all do, after all.
The temperature of this debate is, gently, cooling. Gardner said it out loud in the Nationwide commentary: if the energy shock keeps subsiding, the Bank "may not need to raise interest rates, or at least by less than had previously been anticipated" - a view he notes is reinforced by inflation undershooting expectations in recent months. The curve agrees in its own quiet way: 4.10%, then 4.07%, now 4.00% on the one-year-ahead read across three weeks. The rates conversation flipped towards hikes back in the spring and it has not flipped back - the market still prices the next move as up, not down - but the conviction behind the hike case is draining as the oil price normalises and the PMIs describe an economy shedding jobs and cutting prices. My read, hedged as ever: the August meeting holds at 3.75%, the vote split tells us everything, and the hawks need the inflation data to rescue their case within a couple of prints or the conversation starts drifting back towards cuts by the autumn. I might be wrong about the speed; I doubt I am wrong about the direction. 7-2 looks the safest bet once again (but this is hardly pulling up trees - “Central Banker does nothing different” is right up there with “Pope exposed as Catholic” as far as the big headlines go).
What does it mean for the cost of money you actually borrow? The 4.00% swap keeps 5.8%-ish five-year fixed limited company money on the table, with lenders continuing to shave margins to compete for a thinner pipeline - which is exactly what the Credit Conditions Survey told us they intend to keep doing into Q3. The effective rate on new advances at 4.23% shows the spring's damage still washing through completions, but the forward-looking inputs have improved for a month straight. Last week's best guess - five-year fixed limited company money at 5.75% or lower within six months, all else being equal - stands unamended. The gilts will move in real time; the central bankers will move at their own pace, slowwwwww; and the borrowers who stay disciplined on leverage while the two 4.00% dials argue with the 3.75% reality will be the ones positioned when the argument resolves. KCCO on the rates.
OK. Here endeth the lesson on current rates - here comes the Deep Dive. The through-line this week did not need choosing; it walked into the People's History Museum in Manchester on Monday morning and delivered a speech. Andy Burnham - clear front-runner to be Prime Minister, within weeks - made housing the centrepiece of his pitch to run the country. So this week we test that pitch from four directions: the speech itself, and the enforcement record behind it; the Select Committee's report on the rented sector he wants to reshape, published Friday; a centre-right blueprint for London housing that lands, fascinatingly, on some of the same levers from the opposite end of the political spectrum; and the SME builders whose confidence just fell off a cliff - the people who would actually have to build whatever any of them decide. As a backdrop statistic for all of it, Neal Hudson's chart of the week at BuiltPlace deserves a moment: cumulative new-build EPCs per Prime Minister, showing Starmer's delivery trend running below Theresa May's and Boris Johnson's, and nowhere near the trajectory required for 300,000 net additions a year. That is the inheritance the next occupant of Number 10 - North or otherwise - takes on. Let's get into it.
Paper One: Andy Burnham's Manchester speech - and the platform behind it.
A quick frame: this was Burnham's first major address since Starmer's resignation made him favourite for the top job, delivered Monday 29th June at the People's History Museum. I am treating the speech and his established housing platform together, because the speech gave us the ambition and the record gives us the method - and the two deserve to be read side by side.
Theme 1: Number 10 North and the Biggest Programme Since the War.
The Summary: Burnham proposed "Number 10 North" - an extension of the Prime Minister's office based in Manchester, styled as the nerve centre of a rewired Britain - with responsibility for regeneration, reindustrialisation, reform of essential utilities, and, at the centre of it, "the biggest council house building programme since the post-war period," built at higher density on vacant public land to reduce costs. His framing: Britain has lost almost 1.5 million council homes since the 1980s, roughly the same number of people now sit on housing waiting lists, and the housing crisis is having what he called a "ruinous impact" on the public finances - the state paying ever more to subsidise scarcity it declines to build its way out of. He invoked Finland's Housing First model, which he has already piloted in Greater Manchester, insisted the programme was "consistent with the 2024 manifesto" (his answer to those demanding a fresh election for a fresh mandate), and has separately floated a figure of £40 billion for council house building in an earlier interview. Reaction was instructive: Dr David Crosthwaite, chief economist at BCIS, welcomed the clarity of the construction commitment but noted Burnham had set out "what he wants to build, but not who will build it, how it will be funded, or what would enable a significantly faster rate of delivery." Propertymark's Nathan Emerson welcomed housing at the heart of policy while pointedly adding that continued investment in the private rented sector "is also vital." Reports the same week suggested Housing Minister Steve Reed is separately working on plans for a state-owned housing developer.
The Propenomix Perspective: Let me start with what I agree with, because there is more of it than you might expect from a landlord. The ambition is correct. If the state built a social housing offer good enough that tenants actively chose it, the private rented sector would have to compete on quality and price rather than on scarcity - and competition is precisely what a functioning market looks like. Remove the NEED for private landlords by out-building and out-offering them, and I will applaud from the sidelines while adjusting my own strategy accordingly; that is fair play, and frankly it is the version of this argument I wish more politicians would make. My quarrel is with the method that keeps surfacing alongside it, which treats the existing private sector as an enemy to be fought rather than a delivery partner to be used - combat, not collaboration. And here is the irony that I find genuinely baffling: Burnham's whole career argues against his own instinct. The Greater Manchester devolution settlement was built by negotiating with Conservative chancellors. His cross-party record is one of his genuine strengths, and much of what he has achieved has come through exactly the collaboration his housing rhetoric now disdains. He SHOULD know better than almost anyone in British politics that you get more built by enlisting people than by fighting them. Crosthwaite's question - who builds it, how is it funded - is the whole game, and Neal Hudson's per-Prime-Minister chart (check the FT if you have a subscription, or Neal’s LinkedIn) shows what happens when the answer is left as an exercise for the reader. They all need help and vision on housing, this one included. The vision is at least pointed in an interesting direction. The help, on the evidence of the speech, has not yet arrived.
Theme 2: The Trowel and the Truncheon.
The Summary: Alongside the building ambition sits an enforcement platform Burnham has assembled over years, and it is worth setting out plainly. He has called for councils to be given powers and funding to compulsorily purchase private rented homes that are non-decent (at the Resolution Foundation's Unsung Britain conference), and for a "three warnings and you're out" regime for landlords who ignore repeated notices (on the Social Housing Podcast in May). As Mayor he built the Good Landlord Charter, now covering roughly half of Manchester's rented homes, while financial penalties against Greater Manchester landlords rose 43% under his tenure to £1.47 million; English councils collectively have issued at least £5.2 million in landlord penalties on recent reporting. The national fines architecture he would inherit is already substantial: MEES breaches will carry penalties of up to £30,000 per property per breach from 2030; a £30,000 penalty has been proposed for falsely self-declaring Decent Homes compliance; and the Renters' Rights Act extended and increased civil penalties, with the most serious offences carrying penalties of up to £40,000 (and remember, they can still stack up on top of each other). The mechanics beneath all of it: a Category 1 hazard under the Housing Health and Safety Rating System is any hazard scoring 1,000 or more, and once a council identifies one it has a legal DUTY to act, with an escalation ladder running from improvement notices through prohibition orders and emergency works all the way to demolition orders and compulsory purchase.
The Propenomix Perspective: Two observations, one practical and one about fairness, and I will try to make both without special pleading, since I have skin in this game and so, as it happens, does Burnham - he is a landlord himself, which the coverage rarely mentions. The practical one: the truncheon only works if someone is available to swing it, and Friday's Select Committee report (Paper Two, conveniently) found that less than 2% of tenant complaints result in formal enforcement of any kind, that half of all hazard inspections are carried out by just 20 of over 300 councils, and that the average enforcement officer is responsible for 3,319 properties. A CPO regime for bad rentals, on top of that base, is a press release, not a policy - unless it arrives with the officers, the lawyers and the acquisition capital, and CPOs pay market value plus costs, which rather blunts them as a punishment. The fairness one is the point I most want on the record: the standards conversation is conducted as though poor conditions were a private-sector monopoly, and they are not - the social sector's record is notoriously patchy, this very Committee published separate reports on social housing and temporary accommodation conditions before it got to the PRS, and, in a detail that deserves to be far better known, a local authority cannot take HHSRS enforcement action against ITSELF. The council that polices my Category 1 hazards is structurally incapable of policing its own. If we are raising standards - and we should be - hold the social sector to the same standard first, with the same fines and the same three warnings, before making private landlording even less viable and even less attractive. Otherwise the tenants at the bottom of the market lose their private options faster than the state can replace them, and I doubt anyone in the People's History Museum on Monday wants to own that outcome. How about some transparency and a mechanism to hold local government to account, Andy? Then we’d really be on the same page with a fair shake.
Theme 3: The Voluntary Buyback and the Balance Sheet.
The Summary: The acquisitive instinct in Burnham's platform extends beyond enforcement. As Mayor he established an empty homes task force and lobbied for stronger, faster CPO powers to bring vacant properties into social use; Greater Manchester's Housing First unit has bought existing properties as well as building new ones, in line with the Finnish model he cites; and his fiscal thinking on property is well documented - he has described council tax as regressive, floated replacing stamp duty with a land value tax assessed annually on land rental values, and advocated a broader shift towards taxing property wealth. Regular readers will know I ran a full PropenomAIx Daily deep dive on land value tax (https://www.linkedin.com/posts/adamglawrence_there-is-a-3bn-shaped-hole-in-britains-activity-7478907019702300673-oRJT) , and the intellectual lineage runs straight through this Supplement's recent quote choices: Lloyd George's land problem a week ago, Henry George's Progress and Poverty three weeks before that. The land keeps asking the question; the politicians keep almost answering it.
The Propenomix Perspective: So let me make the offer that the combat instinct keeps missing, because there is a version of Burnham's acquisitive state that I would actually support, and it requires no courtrooms at all. Sponsor a VOLUNTARY buyback scheme: the state, through councils or a national vehicle, stands in the market as a standing bid for private rented stock at a modest discount - and here is my honest read of the mood among landlords right now: at 85 to 90 pence in the pound, cash, clean, no chain, no six-month sales process, a very large number of them would throw in the towel tomorrow. Section 24, the RRA, the 2030 EPC bill, the 2027 property income surcharge - the exit queue already exists; the state merely has to open a till. Give them a CGT break or incentive and watch the housing rain from the skies - honestly.
Yes, it needs a fiscal rule change (or a big BEND of the rules at the very least), because you cannot do this inside a framework that scores the purchase of an income-producing asset as pure spending - which means classifying social housing as critical infrastructure, and given we already carve out all manner of things for less obvious reasons, that is not as far-fetched as it sounds. And now follow the accounting, because this is the bit that makes me want to shake the man by the lapels: the state buys occupied, income-producing assets at 85-90% of market value. It acquires them BELOW replacement cost - the strategy I have based my own investing on since I started taking property seriously - in many parts of the country these days. Most importantly it acquires them below the cost it costs the state to procure them, which is ABOVE insurance rebuild values for a number of reasons.
It collects the rent. It houses the tenant. And it builds, for the first time in generations, a public balance sheet of NET ASSETS rather than net liabilities. Can you imagine it! Willing sellers queuing up, tenants kept in place with a better landlord, the PRS shrinking by consent rather than by attrition, and the Treasury holding property instead of promises. That is what collaboration looks like with the same objectives Burnham announced on Monday. The trowel and the chequebook will build him far more than the trowel and the truncheon - and if he wants to fund the standing bid with a land value tax down the line, well, Lloyd George and Henry George and I will be in the corner, nodding. The most important point of all is that it has a POSITIVE NET PRESENT VALUE - because the state and the Treasury are the one beneficiary of a social housing system that works.
Paper Two: The HCLG Committee - Housing Conditions in the Private Rented Sector, published Friday 3rd July.
A frame: this is the Select Committee's fourth report of the session, landing three days after Burnham's speech with almost comic timing, and it is the most complete official picture of the sector we have had in years. The government has two months to respond. Three themes.
Theme 1: Proportionate, Says the Committee.
The Summary: The Committee's headline judgement is measured: the Renters' Rights Act and the accompanying reforms constitute "a proportionate package of measures that are likely to improve housing conditions for tenants" - with the critical caveat that effectiveness "depends largely on how well they are implemented and enforced." The scale it describes: 4.7 million households rent privately from around 2.3 million landlords; 45% of landlords own a single property, making Britain, in one witness's phrase, a nation of small landlords, although nearly half of all tenancies sit with landlords holding five or more properties. On supply, the Committee states directly that the evidence it received "does not suggest that these measures will have a substantial adverse impact on supply." It declines to recommend rent stabilisation, concluding it is "not currently convinced" that stricter rent measures would be proportionate given the risk to supply - and it quotes Housing Minister Matthew Pennycook's line that international evidence shows rent controls can push landlords out and leave renters worse off. It does recommend unfreezing Local Housing Allowance and re-linking it to at least the 30th percentile of market rents, and demands the government publish its long-awaited long-term housing strategy by the end of September.
The Propenomix Perspective: A cross-party Select Committee looking at rent controls, examining the evidence, and saying no thank you is a quietly significant moment, and it deserves more attention than it will get - particularly in the very week the likely next Prime Minister's back catalogue includes past demands for exactly those powers. Credit where due: this is a committee that weighed evidence rather than vibes, and its LHA recommendation is the right kind of demand-side support, targeted at the tenants most exposed rather than sprayed across the asking prices of the whole market. Where I part company, gently, is the supply serenity. "No substantial adverse impact" may be what the written evidence says; Chris's portal data says rental stock is at 305,000 against 311,000 a year ago and falling steadily, the exit surveys keep finding a meaningful minority of landlords selling some or all of their stock, and the costs stacking up through 2030 and 2035 (of which more in a moment) have not yet hit anyone's bank account. The impact is not in the data YET because the deadlines are not here yet - judging the supply effect of the RRA in 2026 is like judging the tide at slack water. I hope the Committee is right. I would not lend against it. And the September deadline for the housing strategy is now, deliciously, someone else's problem: it lands on whoever wins the leadership contest, roughly six weeks into the job.
Theme 2: The 2035 Problem.
The Summary: The report's centre of gravity is the new Decent Homes Standard, which private landlords must meet by 2035. Today, 22% of private rented homes - over 1.1 million - fall below the existing standard, a share that has not significantly improved since the pandemic. Meeting the new standard will require work on around 48% of the sector's homes, roughly 2.4 million properties, at a total cost the Building Research Establishment models at £26.5 billion, with a median per-property cost of £4,921 but a long expensive tail. The Committee's sharpest finding is about timing: the ministry's own impact assessment ASSUMES most landlords will not act until shortly before the deadline, with 60% waiting until 2035 itself. Alongside it sits the 2030 minimum energy efficiency standard - fabric-first EPC C, a £10,000 investment cap (down from the £15,000 proposed), a value-adjusted exemption for properties under £100,000, and council fines of up to £30,000 per non-compliant property - and Awaab's Law, which the Committee wants rolled out to the PRS starting this year and fully in force by the end of 2028/29. Its recommended carrot: let landlords self-declare Decent Homes compliance on the new PRS Database at the earliest opportunity, so compliant operators can differentiate themselves - backed by penalties for false declarations.
The Propenomix Perspective: The ministry's own assumption is the most honest sentence in the report: everyone waits for the deadline, because the incentive structure points at the deadline, so the deadline IS the plan. We have watched exactly this movie with EPCs for a decade. Which makes the Committee's self-declaration idea quietly the best thing in all 100-plus pages - a mechanism for early compliers to earn a visible badge and a commercial edge, the rare carrot in a debate conducted almost entirely in sticks, and I would take it tomorrow. The money: £4,921 median sounds manageable, and for most of the portfolio landlords reading this it is; the tail is where the pain lives, and the TDS survey the Committee cites tells you how the sector plans to pay - 38% of landlords through rent increases, 17% by selling everything, 15% by selling some. Read those three numbers together and you have the supply-and-rents forecast for the late 2020s in miniature. For the Propenomix reader the tactical map has not changed: know your stock's position against BOTH deadlines, remember the Validity Lock-In - an EPC C secured under the current methodology before October 2029 holds for its full ten-year life - and treat standards spend as moat-building, because when the deadline stampede arrives, the compliant portfolio is the one that gets the tenants, the lending and the premium. The Nationwide research in the Macro section put that premium at 12.2% for investor stock. The market is already paying you to be early. Most of the sector, per the ministry's own assumption, will decline the offer.
Theme 3: The Postcode Lottery.
The Summary: The enforcement chapter is bracing. Freedom of Information data cited by the Committee found that less than 2% of tenant complaints between 2022 and 2024 resulted in formal enforcement of any kind. Half of all HHSRS inspections between 2021 and 2023 were carried out by just 20 local authorities; nearly half of councils issued no civil penalty notices at all in that period, and around 70% issued five or fewer; two-thirds of councils prosecuted no landlords whatsoever between 2022 and 2024. Enforcement capacity averages one officer per 3,319 private rented properties, with staggering variation - Birmingham at roughly 3,750 properties per officer, Newham, which has invested heavily, at 687. The New Economics Foundation modelling the Committee highlights suggests an annual PRS Database registration fee of £46.08 per property could fund a 233% increase in national enforcement capacity, enough to cap caseloads at 1,000 properties per officer. The Committee recommends ring-fencing database fees for enforcement, a full published assessment of council resources and powers, and mandatory annual enforcement reporting by every local authority.
The Propenomix Perspective: One officer to every 3,319 properties in Birmingham's case - my home city's entire private rented sector, one of the largest in Europe, policed by roughly 22 people. Every regulation this Supplement has ever discussed, every fine in Burnham's arsenal, every standard with a proud deadline attached, funnels through that bottleneck, and the Guardian's 2% figure tells you what comes out the other side. Here is the position I want to state clearly, because landlords arguing against enforcement funding are arguing against their own interests: the compliant landlord should WANT the £46.08 and want it ring-fenced, because the rogue operator is not our colleague, he is our subsidised competitor - undercutting on rent by skipping the gas cert, the electrics, the damp treatment and the tax, and dragging the sector's reputation into every headline. A levy that actually removes him from the market is the cheapest reputational repair available. My caution is on the delivery, not the principle: councils cannot conjure environmental health officers - the Committee heard it takes five years to train one - so the fee arrives years before the capacity does, and the honest near-term description is landlords paying more for enforcement that remains a postcode lottery. It is the same two-speed pattern we found in the planning data a fortnight ago: national rules, local reality. The rules are about to get much stricter. Whether your local reality does depends, as ever, on your postcode - and on whether the next government funds the officers as enthusiastically as it announces the fines.
For many years the noise from the sector has been “stop creating more rules and start enforcing the ones you have got” - in the real world this extends FAR beyond housing, but - as with many on-the-ground conclusions - it is rooted in common sense, and facts. Stop letting the worst 10% get away with what the other 90% comply with, even if they comply through gritted teeth (or decimated P&Ls compared to a decade ago).
Paper Three: CPS and Onward - Fixing London Housing, published 2nd July.
A frame: a joint report from two centre-right think tanks, written by Ben Hopkinson and Laurence Fredricks, with forewords from Shadow Housing Secretary Sir James Cleverly and Reform's London mayoral candidate Laila Cunningham - which tells you the intended audience. It landed 72 hours after Burnham's speech, and reading the two together is the most instructive exercise of the week. Three themes.
Theme 1: 4,170 Starts.
The Summary: The report's foundation is a single devastating number: construction started on just 4,170 homes in London in 2024/25, in a year the capital's population grew by close to 100,000. The rest of England is building at four times London's per-capita rate; London has not approached its 88,000-a-year target since the 1930s; and the report calculates that actually resolving the shortage - bringing prices towards construction costs - would require around 1.85 million additional homes, roughly 100,000 a year for two decades, a rate Tokyo and Austin already achieve on a population-adjusted basis. The affordability arithmetic: London prices have outpaced inflation by 7.5 times since 1970 (£5,298 then, £554,000 now, £73,590 had prices merely tracked inflation - a pint at housing inflation would cost £17); on the ONS definition a median-income London household cannot afford ANY property in the capital, not even the cheapest decile. The economic case: Public First modelling shows that hitting the 88,000 target would be generating £14.8 billion in annual GVA and over £6 billion a year in tax by 2034. The political case: London is the region MOST in favour of local building (59% support, 14% opposed) and the one where the centre-right has least to lose. Co-author Fredricks opens with his own story - months of homelessness as a sofa-surfing graduate on a good wage, one of an estimated 167,000 homeless people in the capital.
The Propenomix Perspective: Put 4,170 next to Monday's speech and you have the week in one image: the presumptive Prime Minister promising the biggest building programme since the war, in a country whose richest city just started fewer homes than a single large council estate contains. Last week Berkeley told us the why from the builder's side - they have stopped buying London land because the returns no longer clear the risk; this week the think tanks supply the aerial photograph of the same crater. I would treat some of the report's precision with the usual caution - "1.85 million homes needed" is a model, and models of twenty-year equilibria deserve wide error bars - but the direction and the order of magnitude are not seriously contestable, and the polling detail is the strategically interesting bit: the place with the worst shortage is also the place with the strongest local support for fixing it. The political excuse for inaction in the capital is, on the report's own evidence, largely imaginary. And Fredricks's foreword deserves the wide readership it will not get: a homeless co-author on a professional salary is the affordability statistics wearing a face. The capital's failure is not abstract, and - as we covered a fortnight ago - it does not stay in the capital: it exports its priced-out households, and its price pressure, across the whole South East. The two-tier map in the Macro section is partly London's shortage, radiating outwards.
Theme 2: The Levers Already Exist.
The Summary: The report's central claim is procedural rather than ideological: "most of the necessary policy levers already exist within current legislation... What has been missing is the political will to use them." Its programme: three development corporations on the Docklands model - Southern Tower Hamlets between the City and Canary Wharf (potential for 300,000+ homes), an expanded Old Oak and Park Royal (130,000), and the Bakerloo extension corridor along the Old Kent Road (40,000+) - with shadow corporations stood up before an election so delivery starts on day one. Estate regeneration at roughly double current densities could add around 500,000 homes; since resident ballots became mandatory, 41 schemes have passed against 2 rejections, and the report's exhibit is the Aberfeldy estate - 330 council homes to become 1,582, approved by 93% of residents on a 91% turnout, then delayed two and a half years by the planning committee anyway. Releasing Strategic Industrial Land within a kilometre of a station would unlock 2,293 hectares - enough for around 250,000 homes, currently protected by what the report calculates as a £96 billion implicit subsidy to low-value warehousing. Add optimised public land (7,300 developable hectares, five-year disposal pipelines, Crown Development Orders) and a strong brownfield presumption, and the sites for London's recovery exist without touching a blade of green belt grass.
The Propenomix Perspective: Now hold this report in one hand and Burnham's speech in the other, and notice something remarkable: a centre-right think tank pamphlet and the Labour leadership favourite are pointing at the SAME two levers. Public land, built denser. Existing estates, regenerated at scale. The disagreements - and they are real, wait one theme - are about allocation and tenure, not about where the homes physically go. That overlap IS the cross-party housing programme, sitting in plain sight, available to anyone who chooses collaboration over combat - which has been my drum all edition, so forgive me for hitting it again, but when Cleverly's foreword and Burnham's speech agree on the location of half a million homes, the remaining argument is actually winnable. The Aberfeldy detail is the one I would frame: residents voting 93% FOR densifying their own estate, because they were made beneficiaries rather than victims of the uplift - and the system still costing them two and a half years. That is not a housing shortage; that is a decision shortage. My hedges: the £96 billion implicit-subsidy figure assumes redevelopment values hold at a scale never tested, and development corporations are magnificent until they meet their first judicial review - the Docklands precedent took a Thatcher-sized will to sustain. But "the levers exist, the will is missing" is the most useful sentence written about British housing this year, whoever's letterhead it arrived on.
If only there wasn’t an idiotic building safety act sitting in the way, with the impact of zero lives saved but (in reality) millions of lives impacted negatively by making it unviable to build a building above 18 metres tall these days.
Theme 3: The Bits That Will Start Fights.
The Summary: The report does not confine itself to consensus territory. It calculates that the state spends around £18 billion a year subsidising people to live in London - roughly £9 billion in implicit social-rent discounts (average London social rent £157 a week against £368 privately) plus a similar sum through housing benefit and the Universal Credit housing element. It attacks "absurdities like million-pound council homes," proposing the forced sale of high-value council properties as they fall vacant (indicative thresholds: £400,000 for a one-bed, £460,000 for a two-bed, £570,000 for a three-bed, £910,000 for four or more), with proceeds recycled into building. It proposes a national cap on the UC housing element for new claims at the median national rent, and a revived, expanded Right to Buy extended to housing association tenants, including a redesigned mortgage-conversion version. And it deploys the statistics that will dominate the coverage: 47.6% of London social housing is headed by someone born outside the UK per the 2021 census (the report itself noting many will since have naturalised), and 59% of working-age social housing households are in any form of employment, against 85% of private renters.
The Propenomix Perspective: I am going to handle this the way I try to handle everything: on the arithmetic, without sneering at anyone - not at social tenants, the vast majority of whom took the deal the system offered them, and not at the report's authors for asking questions polite company avoids. Strip the provocation away and there is a real question underneath: £18 billion a year is an enormous sum, and it currently buys queues - 69,000 London households in temporary accommodation, boroughs spending £5 million a night on it - rather than homes. A system spending that much while its waiting lists lengthen is failing the very people it exists to serve, and saying so should not be controversial. Where I get off the bus is the belief that reallocating scarcity fixes scarcity. Selling million-pound voids to fund building I can follow, if the building actually happens - the "if" that has swallowed every such promise since the original Right to Buy receipts vanished into the Treasury. Capping housing support while the homes remain unbuilt just moves the queue around and calls it reform. Allocation fights are what a country has INSTEAD of a supply policy - they are the politics of the first lesson, in Sowell's terms, disregarding the economics of it. The houses first. Always the houses first. And I would note, with a smile, that the voluntary buyback scheme from Paper One would GROW the state's stock while these particular arguments rage on - there is always a transaction available to those who prefer building balance sheets to winning columns.
Paper Four: HBF and Quantum Development Finance - SME Developer Sentiment Survey, Q2 2026.
A frame: the second quarterly sentiment survey of small and medium housebuilders - 110 firms, surveyed 8th to 22nd May, from one-a-year self-builders up to 500-unit regionals. These are the people any building programme, of any political colour, ultimately depends on. Three themes, and none of them comfortable.
Theme 1: The Confidence Collapse.
The Summary: Every headline measure deteriorated sharply between Q1 and Q2. The net balance of SMEs expecting to buy MORE land over the next three months swung from +5% to -31%, with 49% expecting to purchase less and 31% expecting to purchase significantly less; just 18% expect to buy more, down from 32%. Expectations for housing starts swung from +12% to -23%, with 44% expecting to start fewer homes. The overall market outlook collapsed from a net -9% to a net -71%: 75% of SME builders are negative on the next three months and just 4% positive. 94% say current conditions are making them cautious about starting new sites, up from 70%, with 48% reporting significant caution or outright delays. The proximate trigger is explicit: 93% said the Iran conflict had worsened their twelve-month outlook, 26% paused site acquisitions because of it, and the most common effects were slower sales (62%), dearer materials (61%) and impossible cost forecasting (51%). One respondent's line captures the arc: "There were green shoots earlier this year until the Iran conflict." Regionally, the South West is bleakest at 93% negative; the North East is the most resilient, the only region where a quarter of respondents remain positive.
The Propenomix Perspective: Read this beside Paper One and the week completes its circuit: on Monday the probable next Prime Minister announced the most ambitious building programme in seventy years, and on the same news cycle the people who would build a large share of it reported that they have stopped buying the land. That makes it the second land-buyers' strike in a fortnight, after Berkeley - the country's most capable brownfield builder - told us it had downed the chequebook at the top end. When both the FTSE-listed giant and the five-unit local firm reach the same capital-allocation decision independently, the signal is about the system, not the firms. And the mechanism deserves spelling out, because land is the leading indicator of everything: a site not bought in the summer of 2026 is a planning application not made in 2027, a start not made in 2028, and completions missing from precisely the years every political building pledge matures. The 2029 shortfall is being manufactured now, quietly, in a hundred small decisions to sit on hands - and no speech, from any podium, reverses it until the numbers on the appraisal spreadsheet do. Even the regional split sings the same two-tier song as everything else this week: grimmest in the South, most resilient in the North East. One country, two markets, in sentiment as in prices.
Theme 2: Viability Overtakes Planning.
The Summary: For years the sector's reflexive answer to "why aren't homes being built" has been planning. This quarter, for the first time in the survey, development viability overtook planning delays as the most-cited supply-side constraint - named by 75% of SME builders, up from 57%, against planning at 74%. Materials cost and availability tripled as a concern, from 10% to 30%. On the demand side, market conditions (69%) and low buyer confidence (63%) lead, but the sharpest mover was mortgage interest rates, leaping from sixth to third place, cited by 41% against 22% last quarter. Almost all respondents - 99% - said government measures to improve viability would make them more likely to bring sites forward, 83% saying much more likely. The respondent quote the HBF chose to highlight: "Constant legislative and regulatory changes are tearing a hole in the viability of a number of sites."
The Propenomix Perspective: This is, quietly, the most important finding of the week, as far as the broader landscape is concerned and I want to be precise about why. Planning problems are fixable with process: more officers, statutory deadlines, presumptions in favour - the stuff of every white paper. Viability problems mean the numbers do not stack even WITH the permission, and no committee reform on earth fixes an appraisal that loses money. The industry has just told us the disease has moved from the paperwork to the arithmetic - and the arithmetic is a stack of this Supplement's own back catalogue: the £76,000 that HBF calculated new taxes and policy costs add to each new home (our 10th May edition), the Building Safety Levy Berkeley called counter-productive, the 2030 and 2035 standards bills from Paper Two, materials up 5.4% on the year, and now a steel regime that doubles the out-of-quota tariff on rebar and sections - each defensible alone, collectively tearing the hole the respondent describes.
Here is the thought experiment I would set for Number 10 North: your programme will be built, if it is built, on exactly these appraisals. Every pound of policy cost loaded onto a private site is a pound your delivery partners cannot pay for land, and the SIL release and estate schemes in Paper Three live or die on the same spreadsheets. Fix the viability and the planning queue shortens itself, because suddenly the applications are worth fighting for. I suspect the reverse - fixing planning while viability bleeds - gets you consented sites that nobody builds, which is roughly the museum exhibit Savills forecast for us a fortnight ago.
Ever since the START of this parliament, I have described the problems like a rope bridge across a yawning canyon with several gaps that are unleapable, even by a combination of Indiana Jones and Bob Beamon - an obvious state of affairs, but like a bunch of idiots this Government simply conspired to “fix” the first gap, without sending people in a cherrypicker or a helicopter to fix the other yawning gaps simultaneously. THIS is why nothing gets done at pace - solve the problems in parallel, not in series - that’s it!
Theme 3: 87% Want the Demand Lever.
The Summary: The survey's clearest policy signal points at demand: 87% of SME builders said additional support for buyers would make them more likely to start new sites, including 56% saying much more likely, and the HBF's own framing argues that weakening buyer demand "reinforces the case for a new Government equity loan scheme" to support first-time buyers. A respondent puts it without varnish: "The single most important issue facing the industry is the lack of any Government supported demand-side initiatives. The implementation of a modernised Help to Buy scheme would make a dramatic difference to the overall market."
The Propenomix Perspective: And here we are again. By my count this is the fourth consecutive edition in which a serious institution has reached for the demand lever - the SMF's Citizens Advance, Savills' "clearest policy lever," the Resolution Foundation's Starter Deposit, and now the builders themselves - and I am fully aware I am becoming a broken record on this, but the objection keeps being right, so the record keeps playing.
Demand support poured into a constrained pool of homes bids up the pool; we ran Help to Buy, we have the receipts, and even Savills' own modelling conceded a quarter of the supported completions would not be additional. I will grant the builders more sympathy than the think tanks, mind - for them it is not ideology, it is next quarter's order book, and 87% of a struggling industry asking for customers is simply honest. But sequencing is everything: a demand scheme riding BEHIND a genuine supply programme helps buyers compete for a growing stock; riding in front of one, it is price support with a rosette, and the seller pockets the subsidy. If the next government must pull a demand lever, there is exactly one available that inflates no asking prices, requires no scheme design, and reaches every buyer at once: cheaper money. Which is why those two dials parked at 4.00%, and the 25 basis points of daylight between them and the 3.75% reality, matter more to the delivery of anyone's building programme than any equity loan ever will. The houses first; the rate second; the rosettes, if we must, a distant third.
Let’s please remember - WHEN, and it will be when, they reach for the Help to Buy (renamed, of course - this is politics after all) lever, then dear reader we will all be winners on the back of it. Jolly good? Well, I’ll take it. I’m not donating it to charity (yet). My margins are too slim. But it won’t solve the overall problem, Andy. It might just help you get elected next time round (if you don’t do the early election thing) - and that’s probably why you will do it, because you will be able to justify that in your head like all “good” (heh) politicians. “I’m the best person for the job, so the mechanism that keeps me in it, whilst a bit of a compromise, is justified”. Because guess what, folks? This time is isn’t different. It never is. As usual, no-one is coming to save you. But never fear……just Keep Calm and Carry On.
As we get towards the end for this week - the next workshop is now live, and I could not be more pleased with the topic. Joint Ventures and Mergers & Acquisitions: Thursday 1st October, Central Manchester, 9:30 to 5:30. Everything from share classes and shareholder agreements through structuring capital (debt versus equity, and keeping everyone's risk where it belongs), JVs from the hard-won experience of dozens of them - the good, the bad, and the properly ugly - to asset versus share purchases, and closing with a case study on selling a company with your back against the wall, because knowing how to negotiate a distressed disposal is worth more than a hundred motivational posts. Rod and I have been looking forward to this one for months. And yes, we have checked the fixture list this time. Mostly. Get your name down at www.tinyurl.com/pbwoct26 - the VIP dinner will do what the VIP dinner always does, which is sell out first and set the standard for the conversation. Get your Super Early Bird 20%+ off face value tickets bought!
Above all - please remember to Keep Calm, ALWAYS listen to or read the Supplement, and Carry On. It has been a week of big speeches and bigger numbers - a Prime Minister elect (that’s now a thing, apparently) reaching for the trowel, a Select Committee measuring the sector he wants to reshape, a mortgage market flinching, and two dials settling at exactly 4.00% - so let me end where I always end, on the fundamentals, because they have not budged. There is a shortage of 2-3 bed terraces and semis; there was one fifteen years ago; and every single document in this week's Deep Dive deepens it - the capital starting 4,170 homes, the small builders downing tools on land, the standards bills stacking up on the existing stock.
Nobody in this week's edition is about to flood the market with the houses people actually need. "Investing in property" is not a guaranteed win, and with the long end of the gilt curve charging a political premium and the completion air pocket still ahead of us, the discipline on leverage and loan-to-value earns its keep this month as much as any I can remember. But buying below replacement cost, in undervalued areas, strong on the spreadsheet and strong on yield, in a market that is repricing quietly in real terms rather than crashing in nominal ones - and now at real price levels we have not seen since the early 2000s - remains as close to a guarantee as this game has ever offered. The houses still are not being built. The people still need somewhere to live. England play Mexico at the Azteca late tonight, and by the time most of you read this we will know whether the nation's mood matches the market's. Everything else is noise. KCCO!