"The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries." - Winston Churchill
The quote pertains to the bipolar political landscape we now find ourselves in - and we get into that - and what it means for Property Investors - in the Deep Dive this week.
As we charge headlong through the biggest change in housing law in 38 years, our next Property Business Workshop is live and tickets are already selling. This is about due diligence - and REAL due diligence - performed on you by lenders and prospective investors, as well as what you should be doing on potential business partners and - most importantly - property deals. Book in on the next Property Business Workshop with myself and Rod Turner - Wednesday 1st July - Central London - https://tinyurl.com/pbweleven
Welcome back to Trumpwatch. Let's start right here at home, where the political landscape has just undergone a seismic shock. Thursday's local elections delivered an absolute gut punch to the established order. Labour lost more than half of their seats on local councils, a bruising reality for Keir Starmer less than two years after his parliamentary landslide. But the truly macro-relevant story for this column? The biggest winners of the night were Nigel Farage and Reform UK.
Farage - a highly visible ideological ally of President Trump who has shared the stage with him multiple times - called the result a "truly historic shift in British politics," while the Green Party leader (Che Guevara or whatever his name is) declared the de-facto two-party system "dead and buried." With Labour being wiped out in traditional strongholds and Reform effectively replacing the Conservatives as the main opposition in working-class areas, the populist realignment we’ve seen in the US and Europe has officially landed on our doorstep. Given Trump’s well-documented icy relationship with Starmer, the Oval Office will be watching Farage’s surge with intense interest.
Across the pond, however, Trump’s own economic bazooka just suffered a massive misfire. On Thursday, the US Court of International Trade struck a brutal blow to the President's flagship trade agenda, ruling his blanket 10% global tariffs outright illegal and "unauthorized by law."
The administration had tried to force these tariffs through using Section 122 of the Trade Act of 1974, claiming a "serious balance-of-payments deficit." The judges in New York entirely dismantled that argument, ruling that a standard trade deficit does not constitute a balance-of-payments crisis. It’s a huge victory for the small businesses crushed by these levies, and a major legal humiliation for the White House following the Supreme Court's earlier block on his emergency economic powers. Make no mistake, though: US Trade Representative Jamieson Greer is already launching fresh Section 301 investigations to find another legal loophole to hit trading partners with new duties by late July.
Finally, in a rare moment of diplomatic deferral, Trump extended an olive branch - or perhaps a ticking time bomb - to the European Union. Despite threatening steep 25% car tariffs just last week, Trump took to Truth Social on Thursday to announce a reprieve. Following a phone call with European Commission President Ursula von der Leyen, he has given the EU until July 4th (the US 250th birthday) to slash their levies on American goods to zero, as per last summer's delayed trade agreement. If they fail, tariffs will "immediately jump to much higher levels." European Council President António Costa's official advice to the bloc this week was to "keep calm and carry on" (perhaps he reads the Supplement?) and pointedly resist replying to every presidential tweet.
For the macroeconomist in me and the property investor in all of us, the fallout from this transatlantic chess match is impending. The US is actively weaponising trade on a multi-year basis, and the UK is caught entirely flat-footed. Thankfully, the checks and balances, and the law (remember how important that is? We really should do, at this point) work in part. We are takers here, and whilst DT isn’t Magnus Carlsen, we are playing like 5-year olds. I have no idea why we don’t find some strength - the only respect Starmer (while he lasts) will ever get from Trump is by being strong - and respect (as he clearly had for the King) does get results with the prez. Get on with it, or get out.
Phew - stepping away from the transatlantic macro-storm, let’s get back to the brutal reality of the real-time UK property market…
As is customary, Chris Watkin has been relentlessly crunching the portal numbers and then publishing them at Property Industry Eye. His analysis for Week 17 of 2026 is where it is at, as always. If you want to know how the macroeconomic gridlock translates to the local high street, and the REAL property market on the ground, look no further.
Let’s start with the supply side, which remains frankly astonishing. 43,400 new properties came to the market in Week 17 (up from 40,200 last week). Holy Cannoli - that’s a LOT of properties. The Year-to-Date (YTD) supply pipeline now sits at an enormous 637,000 listings. That is 1% ahead of 2025, but a massive 17.5% higher than the pre-COVID 2017 - 2019 norm. My year-plus adage of “10% more stock than a normal market” ready reckoner is rising, if anything. Homeowners and exiting landlords are exceptionally eager to sell. 15% might be closer to the truth at this point.
But are they actually selling? That’s the £64k question I’m asking every week at the moment, both here and in my businesses day to day.
On the demand side, Gross Sales (Subject to Contract) had a phenomenal run, jumping to 27,700 for the week - making it the best week for residential sales in 45 weeks and beating the 10-year Week 17 average of 25,100 comfortably. It’s an interesting market, from a geeky economist perspective, because Supply and Demand move about as independently as I can visualise in any market of size - there’s some relation of course, but not that much. What does this mean, by the way, from a textbook perspective? The market isn’t particularly efficient. Particularly at the one-property level - which is exactly why you can get deals, folks, much more easily than picking stocks or crypto and without the volatility. It’s still not easy - to be clear - it takes time, effort and skill - but it’s far more accessible, and that’s part of the massive attraction of residential property as an asset class.
YTD, we’ve seen 422,000 gross sales, 12.5% above pre-COVID norms. People are still moving. The underlying demographic drivers - the classic 'Five Ds' of death, debt, divorce, downsizing, and diddy ones - plug away week in, week out, entirely indifferent to the geopolitical drama. Net sales are also playing ball, printing at a very healthy 21,700 for the week.
However, the friction between these willing sellers and eager buyers is immense, and it’s captured perfectly in two glaring metrics: the pricing gap and the withdrawal rate.
The gap between the average listing price (£455k) and the average sale agreed price (£363k) has widened even more to an intergalactic 27.4%. The long-term historical average is 16% to 17%. Sellers are coming to the market mainlining on that 'hopium' factor, facilitated by desperate estate agents who are buying instructions with overinflated valuations. Why, when they’ve already got so much stock on the market? It just DOESN’T make sense. Frankly - because the corporates are one-dimensional and the staff are already trained, and so be it.
Chris always highlights this exact toxicity, noting that a staggering 46.7% of homes that left agents' books in April were withdrawn unsold. Almost half the market is failing. Agents are locking vendors into draconian 20-plus week sole agency contracts based on fantasy valuations. As Chris rightly points out in his commentary: a long contract doesn't protect the seller; it simply protects the agent while they spend months chipping away at an unrealistic asking price with "salami style" reductions.
The mechanism resolving this friction, as always, is price reductions. There were 26,300 price reductions in Week 17 alone, which at that pace sees well over 100k/homes/month reduced in price. Indeed, 13.1% of all UK residential homes for sale had their price reduced in April.
We are also seeing some of the macroeconomic tension bleeding into the pipeline. Fall-throughs jumped to 5,927 this week (up from 5,793). Interestingly though, because gross sales were so strong, the fall-through rate actually dropped to 21.4% (down from last week's 25.8% and tracking below the 24.5% long-term average). Still, a pipeline of 461,000 homes Sold STC represents a huge amount of friction waiting to happen as swap rates twitch and mortgage lenders reprice upwards.
The Takeaway: As Chris concludes, buyers have choice, and when buyers have choice, pricing gets exposed quickly. The market is functioning well, but power remains firmly with the buyer. As an investor, that massive 27.4% listing-to-sale price gap is your hunting ground. Do not overpay. Let the delusional sellers withdraw, and focus your capital on the motivated vendors who understand that the 2026 market demands strict, brutal realism.
One piece of bonus content from Chris this week is a look at the UK rental data. The average rent in Week 17 hit £1,778 pcm, reflecting the wider April average. When you consider we were at £1,700 in April 2025, that is some serious, sustained rental inflation. And with just 302k UK rental properties available in stock (down from 303k a year ago), the fundamental supply-demand imbalance in the PRS is going nowhere fast. Just wait a few more weeks, having seen the number of enquiries to sell properties this week first hand…..
732k properties were for sale on 1st May 2026. This is up 2.4% on last year’s already-overstocked market. It is - as is simply typical at the moment - the most stock on the market on the turn of May for over a decade. As you can see - demand isn’t the logjam, even in spite of the geopolitical events and the resultant changes to the interest rate. Everyone is keeping calm, and carrying on.
I do think some of this explains the huge gap between the price of what’s coming on and what’s selling, though. It isn’t all overinstruction, even though Chris’s point is perennially valid around that weak practice. The more expensive stock, down South as a rule, suffers more than the cheaper stock in the Midlands/North and therefore, if plenty is coming on in all locations, much more (proportionately) from the cheaper stock is selling, and that’s exacerbating the gap from the norm (16-17%) to these heady heights of a 25% gap.
I was speaking at a meeting in the week before last and one of the fellow presenters presented some data from the locale (Staffordshire) - the same gap that Chris refers to was about 10% (330k to 300k, asking to sale) - much, much more realistic in a mid-market midlands setting and much more “average” given the average house price, from an ONS perspective, is hovering around the 280k mark.
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!
The macrowave warms up one more time, then. We’ve got Halifax’s price index this week. The PMIs were out with a bang, not a whimper. There’s a mini-gap which I can fill with a rare look at the accredited official statistics on Construction Building Materials, which everyone doing any projects at the moment will no doubt be interested in. Then - you know it - the gilts and swaps, as things abated slightly this week.
Let’s kick off the Macro section, then, with the indices. Last week we dissected Nationwide and Zoopla, and this week Halifax steps up to the plate with their April 2026 figures. If you were looking for a booming spring bounce, you are going to be thoroughly disappointed - and the size of divergence between Halifax and Nationwide is one I don’t remember being this large for a long time!
First up, the headline numbers. Halifax reports that UK house prices remained broadly stable, edging down by -0.1% in April. This follows a sharper -0.5% fall back in March. The average property price now sits at £299,313, dropping just below the £300k psychological barrier and down from £299,609 the previous month. Annual growth has also lost its steam, slowing to a mere +0.4%, down from +0.8% in March.
Once again, as I noted with Nationwide last week, you have to look at these nominal figures through the lens of inflation. A +0.4% nominal rise while inflation runs hot means that in real terms, the value of UK bricks and mortar is actively shrinking - significantly. I started saying “Cheapest for 20 years” back in 2024 when the price was back to 2004 after being adjusted by RPI. That’s now back to 2003 and we are in 2026 (so we’ve got 3 years for the price of two) and this year looks absolutely guaranteed to be another step backwards in real terms, from clipped capital growth thanks to more expensive money and inflated inflation thanks to the Middle East conflict.
Amanda Bryden over at Halifax is citing the exact macroeconomic chaos we've been tracking. She rightly points out that recent global developments and higher energy prices have fed straight into inflation expectations. This has prompted the markets to reassess the path for interest rates, pushing up borrowing costs for buyers. The result? Households are incredibly cautious, with the cost-of-living squeeze front and centre in their minds once again.
The pain is particularly acute at the bottom of the ladder. Even with prices supposedly "stable," affordability remains stretched, pushing the average price paid by first-time buyers down slightly to £238,908 - its lowest level so far this year.
But just like Zoopla showed us last week, beneath that flat national average is a brutal, structural North-South divide.
Up North, capital growth is still breathing.
Northern Ireland continues to lead the pack, recording the strongest annual growth in the UK at +7.6%, taking the average price there to £224,851.
Scotland is also holding firm, rising +4.0% annually to an average of £222,448.
In England, the northern regions are dominating. The North East saw prices rise +4.5% over the year to £183,445.
The North West recorded annual growth of +3.4%, with the average home now costing £248,945.
These are all even more pronounced figures than Nationwide suggests for these regions - so, that can only mean one thing mathematically…..the Southern figures must be worse than they are in Nationwide figures, which aren’t “impressive” in the first place anyway! Indeed, down South, it is a completely different, thoroughly miserable story. The southern markets continue to see prices fall as the reality of higher borrowing costs heavily impacts higher capital values.
The South East led the declines, with prices down -2.0% year-on-year to £383,044.
London saw average values fall by -1.4% to £536,051.
As for the broader market, the transaction data included in the report paints a picture of a market that is churning away surprisingly well despite the macroeconomic headwinds. HMRC data shows that seasonally adjusted residential transactions in March 2026 totalled 104,070. That is up by +1.3% from February, and the quarterly run-rate is up +1.0% compared to the final three months of last year.
Now, the report does point out that year-on-year transactions were -40.9% lower than March 2025. But we know exactly why that is: last year’s March 31st stamp duty deadline heavily distorted the 2025 figures, creating an unnatural spike that makes this year look comparatively weak. Do not be fooled by the percentage drop; 104k transactions a month is a perfectly healthy, highly functional market.
However, we do need to keep an eye on the forward-looking indicators, because the sentiment is souring. The March 2026 RICS Residential Market Survey points to a softening in activity as geopolitical uncertainty bites. New buyer enquiries have weakened materially, dropping to a net balance of -39%. Agreed sales also plummeted to -34%. Even new instructions moved into negative territory at -6%, indicating sellers are becoming hesitant to test the waters.
The takeaway for the bloodless capital allocator? The market is currently transacting at a healthy volume, but prices are basically flat in nominal terms, meaning your real yields are doing the heavy lifting right now against inflation. If you are holding stock in the South, the repricing is real and ongoing. If you are acquiring in the North, the capital growth is still there, and you have the comfort of knowing that the broader UK market has maintained a solid baseline of transaction liquidity. Leverage is expensive but also depreciating fast, and the 3% inflation world makes the leveraged property investor a nice quid or two by just keeping up with inflation - it’s 50% more effective at 3% than it would be if we lived in a 2% world, like in the old days, is one way of looking at it……
Next up, my darling metrics: the PMIs. If you want a real-time, unvarnished insight into the plumbing of the UK economy, S&P Global always delivers. This week, we got the final numbers for April 2026, and if you want a perfect picture of an economy pulling in completely opposite directions while simultaneously catching fire on the cost side, this is it.
Let's start with a small bit of good news, or what looks like it on the surface. Manufacturing printed a massive 53.7, its best level in nearly four years (47 months, to be precise). The sector has now posted above the neutral 50.0 mark for six successive months. We are seeing output, new orders, and even employment rising, with staffing levels increased for the first time in 18 months. But hold the applause. Rob Dobson at S&P Global points out the massive catch: the gain in production is partly just clients bringing forward purchases in a panic to mitigate expected price uplifts and supply disruptions. And those disruptions are very real. The Middle East conflict and the Strait of Hormuz blockade we discussed earlier have caused supplier delivery times to lengthen to their worst levels in almost four years. The result? Input price inflation in manufacturing is rising at a pace rarely exceeded outside the pandemic-related surge of 2021-22. Firms increase inventory at a time like this, which usually leads to lower returns overall (especially those who follow lean or just-in-time frameworks). This affects profits which in turn affects future investment - from a “book” perspective anyway.
Then we get to Services, the absolute behemoth engine of the UK economy. It bounced back nicely to 52.7 from March’s miserable 11-month low of 50.5. We are growing, supported by the broader Composite Output Index moving up to 52.6. But again, look under the hood. While activity picked up, total new work was broadly unchanged, and export sales are falling due to ongoing geopolitical tensions. But the real story here is, once again, the inflation monster. 57% of the survey panel reported an increase in cost burdens in April. That translates to the strongest rate of input price inflation since November 2022, driven overwhelmingly by surging fuel bills and increased salary payments. What does the service sector do when its costs spike? It passes them straight on. Prices charged by service providers just surged to their highest overall inflation rate since January 2023. These reports influence the Bank of England’s MPC without a doubt, and although any lingering thoughts of summer base rate cuts have already been furiously tippexed out, this works towards the “higher for longer” philosophy once more.
The absolute horror show of the PMIs this month is reserved for Construction. Make no mistake, this report is flashing deep, deep red. The headline PMI crashed to 39.7, down from 45.6 in March. We are so far adrift from the magic 50-handle it is genuinely terrifying, marking the weakest reading for five months.
Every single sub-sector is cratering. Civil engineering registered the steepest decline at 35.3. House building collapsed to 38.2. Even commercial work, which has shown some resilience lately, fell to 42.7. Why? Because the pipeline is completely drying up. Respondents widely reported a total lack of new work to replace completed projects, logging the sharpest decline in total new business since November 2025. The Middle East conflict and elevated borrowing costs mean clients are simply refusing to pull the trigger on new investments, leading to longer sales conversion times.
And as if a total collapse in output wasn't enough, the sector is being squeezed to death by costs. Around two-thirds of the panel reported higher cost burdens, registering the steepest rise in purchasing costs in three decades if you exclude the post-pandemic anomaly. Subcontractors are jacking up their prices to the greatest extent in three years, international shipping delays are causing chaos, and fuel surcharges are rampant. Unsurprisingly, firms are shedding jobs at the steepest pace for four months because they simply cannot afford to keep people on the books with no new work coming in.
The takeaway for the informed property investor? The private sector is technically expanding thanks to services and a front-loaded manufacturing panic, but the inflation plumbing is completely broken again, and the UK construction industry is officially falling off a cliff. Keep your hard hats on. More metrics that look good on the surface (and will flatter with upcoming growth figures for the UK economy - more political spin on the way - although it makes it difficult to “blame Trump/Netanyahu/Iran/whoever” if the figures are actually looking good on the surface! This is different from February’s growth print which was that surprise 0.5% - that was back pre-war when the economy in January and February was actually doing better than a lot of clickbaiters and part-timers were saying - that was genuine, this is largely false hope (but - a point I’ve made many times before - there’s no guarantee that war is bad for stocks or for the economy, certainly not universally so). It’s all timing and some of the pain has definitely been delayed here, and the after-effects - even if the war randomly ends tomorrow and the Orange Man tells us that it was all “fake news” - will go on for 18-24 months here in their own way.
Let’s move on to the third piece of the macro puzzle, and it perfectly validates the horror show we just saw in the construction PMIs. The Department for Business and Trade has just dropped its Building Materials and Components commentary for April 2026. If you want to know why Britain isn’t building any houses, the answers are buried right here in the supply chain data.
First, let's look at the underlying economic reality that the government is being forced to admit. Buried in the background notes, the ONS data confirms that total construction output fell by 2.0% in the three months to February 2026. The main culprit? Private new housing, which absolutely cratered once more by 6.5%. The Bank of England's own intelligence agents report that new-build housing activity has "stalled". Why? A toxic combination of weak demand, elevated funding costs, and persistent planning delays.
You can see this stall perfectly reflected on the ground in the market, and data is always the best place to draw conclusions from. In March 2026, deliveries of bricks were down 3.6% year-on-year , and concrete block deliveries fell by 3.3%. We simply aren't laying the foundations for new stock. In fact, domestic brick production has fallen from 1.95 billion in 2022 to just 1.55 billion in 2025. To paper over the cracks of our decimated domestic manufacturing base, we are increasingly reliant on overseas supply, with imported bricks now making up just under 20% of the total UK market.
But here is the truly lethal part for developers and SME contractors: despite this cratering demand for materials, the costs are still going up. The material price index for 'All Work' increased by 2.6% in the year to March 2026 , jumping 0.9% in March alone.
If you look under the hood, the price of the heavy, essential aggregate materials is surging. Gravel, sand, and clays jumped an eye-watering 8.4% year-on-year. Fabricated structural steel is up 8.2%. Paint is up 6.1%. Yes, we've seen some minor deflation in concrete reinforcing bars (-7.1%), precast concrete blocks (-3.4%), and cement (-3.1%), but the aggregate basket of goods is still squeezing developer margins to breaking point.
The takeaway for the investors? Building new property in the UK right now is a hostile, high-friction, low-margin endeavour. You are fighting broken planning departments on one side, and sticky, imported material inflation on the other. If you hold existing, standing stock, its replacement cost is quietly rocketing while the pipeline of new supply dries up. As we always say: when you can't afford to build the new, the old becomes incredibly valuable. I’ve based my strategy around buying below replacement cost ever since I started taking property seriously - and the gap between replacement and secondary market is orders of magnitude larger than it was when I started out……
The old days where sensitivity analysis was 10% of cost - long gone - gone since 2021/22 blew them apart in many ways, but there’s a risk of getting back there. The downside risk on GDV however is far, far smaller (too much sensitivity analysis I’ve seen over the years looks at 5-10% variance in each metric, in spite of the fact that one is much more likely to move than the other). At this time, on the back of years of nominal flatlining or small rises, and real terms decreases everywhere save Northern Ireland, GDV downside risk is actually very small (there’s the glimmer of hope in the sandwich I’ve just served up!).
OK. Time to get Gilty, or not Gilty. The short week instead looked a bit like the Scottish verdict of “Not Proven” - it gapped up on the Tuesday open on the 5-year yield, we tested 4.65% on the Tuesday and it looked fugly from the 4.492% open - but the close was 4.47% for a 2 basis point decay on the week.
The yield curve is no longer dramatically higher than it was 12 months ago. That’s more because 12 months ago the fallout of “liberation day” being 30-40 days in was higher yields - because economies were damaged by the tariffs - than it is by the yields calming down. We still have 30-year gilts at 5.58%, and the expectation for base rate in 1 year’s time is 4.35% (that’s not as precise as the market makes it sound of course, but the “market best guess” is 4.25% with a possible 4.5% and then lower probabilities on outcomes further away from that.
Now listen. We’ve seen this movie before. Cost-push inflation because commodity prices go upwards - check. This was all in place BEFORE Russia/Ukraine, which historically, from lazy commentators, takes the “blame”. Covid did this - and the same effects apply here - because decisions made on closing oil wells, or not mining, or all the other decisions made in 2020 have impacts for years to come, not weeks and months to come. This stuff doesn’t just stop and start at the touch of a button. It’s costly. Things can go wrong. It takes capex. Investors will need to be sure they aren’t throwing money away because the people in charge can change on a whim. “But the Interest Rate doesn’t fix Cost-Push Inflation”, the semi-informed commentators (always dangerous) screamed. No-one argued with that - a few (like me) bothered to point out that they’d missed the nuance. If inflation WAS transitory (as they thought it was - they are yet to be proven right on that, as I’ve been saying for years) then raising the interest rate wasn’t ever going to help. However, as soon as wages started to really increase, and services inflation was north of 5% (amongst a lot of other markers) - there was no choice but to raise rates for messaging and also risk management purposes. That’s what drove rates in 2022, and that once again will control the rate rises in 2026 and beyond. Like the gilts, there’s no material change in the swaps this week either.
The central bankers don’t WANT to put the rates up. They know it will hurt the economy. Confidence was in the toilet in spite of the rates generally trending downwards since August 2024, not because of it. With rates going the other way, business and consumer confidence only gets lower still.
How do you fix that? Communicate well. How do you fix the problem that the electorate has highlighted, with a big fat marker this week? You get Keir Starmer to resign, of course. Good luck with that - this isn’t the Conservative Party and the processes aren’t the same. He’s a stubborn one - it needs the MPs to move on the letters of no confidence, realistically. 37 MPs have “called for resignation or a timetable” as I’m writing this - nowhere near the 80 firm letters needed to force a contest. Most don’t want to be the first movers - there’s no advantage in that - so let’s see what transpires next week, but it’s by no means a racing certainty that Starmer is gone.
I look to the betting markets in these situations - and the odds are currently as follows: Starmer gone between July and September - 40% probability. October - December - 24% probability. Before the end of June - 13% probability. The rest is the odds that he survives 2026 - about 23%. None of this will settle the bond markets much until then - the front runner is Burnham, but not miles ahead of Rayner (if he had a seat that would change that, of course), then Wes Streeting as more of an outsider.
OK - no stability on the horizon I’m afraid. Let’s dive deep - and I can’t avoid the local election results of course, but with an eye on exactly what this all means for the property market - including the fact that Reform will “save the day” for landlords hanging on who frankly have had enough. There’s a super report from the Homebuilders Federation which caught the eye with a headline number of £76k being added to the cost of building a house since 2020 (yikes!). A piece on the Bank of England blog caught my eye as well around flooding - I’m medium and long-term very bearish on flood risk areas under the current local authority spending regimen and the Governmental budget constraints. This needs a look and this is what the Bank will be basing decisions on, as well. Last up - the IFS have reported on energy efficiency and house price values - and this is a big gap that needs addressing - the cost of upgrades versus the value differential - or not - into the property. This is the CENTRAL problem behind upgrade schemes - and exactly why so much grant money has been needed so far, and so much more will be - the market just doesn’t think that much of the EPC in the ground, in the data, in the real world. Off we go……
Let’s get into the Deep Dive. Thursday’s local elections were not just a protest vote; they were a systemic fracture. Labour haemorrhaged over half their council seats that were contested, the Conservatives were practically relegated to a minor regional party in certain postcodes, and the populist wings - Nigel Farage’s Reform on the right and Zack Polanski’s Greens on the left - tore through the political centre.
So, let us play the ultimate "what if" game. What happens if this exact voter geography translates into a General Election? We are looking at a deeply hung, highly chaotic parliament where the ideological fringes hold the balance of power. As capitalists, we shouldn’t care about the politics; we care about the fabric. How does this impact housing policy, where are the opportunities, and most crucially, what will the bond markets do?
Let’s break down the two most likely outlier scenarios.
Scenario A: The Populist Right Reality (The Reform Influence)
If Farage and Reform UK hold the keys to Number 10, either via a coalition or a confidence-and-supply arrangement, or an outright win, the private rented sector (PRS) enters a fascinating, albeit highly volatile, new era.
Housing & Property Policy: This would be the bonfire of the regulations. The first casualty? Net Zero. All impending EPC minimums and mandatory heat-pump retrofits would be scrapped on day one. The ideological push is for deregulation and libertarian economics. The much-maligned Renters Rights Act would likely be heavily diluted (they say “scrapped” - read “amended). Section 21 evictions might return in some mutated form, or the grounds for possession under Section 8 would be strengthened so heavily in the landlord's favour that it amounts to the same thing (and this would be a better solution, IF the courts were prepared to deal with the workload of course).
You also have to factor in their headline policy: net-zero immigration. If you cut net migration to zero, you fundamentally alter the tenant demand profile.
Gilts and Mortgages:
Here is the massive catch. The bond markets are deeply, fundamentally allergic to populism. Do we remember the Truss/Kwarteng mini-budget of 2022? I’d expect so, since I’ve mentioned it hundreds of times in the past few years. That was just a preview. If Reform’s economic platform involves massive, unfunded tax cuts - which at times it has threatened to - and they scrap VAT on energy, raise income tax thresholds, and slash corporation tax before fixing the deficit - trouble is ahead. More recently they’ve suggested they won’t do this and will get first before they give. That doesn’t win elections though……
If a populist right-wing government attempts to borrow tens of billions to fund these cuts, the "gilt vigilantes" will absolutely savage UK sovereign debt. Gilt yields will spike violently. 5-year SONIA swap rates will smash through previous resistance levels and comfortably breach 6%. Retail mortgage rates would rocket overnight. Farage knows this. Tice knows this. Yusuf knows this. Perhaps that saves it from happening. We’d have to hope.
The Landlord Opportunity:
In this possible scenario of 6%+ yields, highly leveraged landlords get entirely wiped out by the cost of debt. However, for the low-leveraged or cash-rich investor, the opportunities are immense. You no longer have to ringfence £10,000+ per property for green retrofits. Your capital expenditures drop. With mortgage rates sky-high, homeownership becomes completely unaffordable for the masses, keeping tenant demand robust despite lower immigration. The play here is traditional, high-yielding family lets in the Midlands and the North. You buy the distressed stock from leveraged landlords who are defaulting on 7% stress tests, and you enjoy a low-regulation, high-yield environment. HMOs in transient/migrant-heavy areas, however, might suffer a severe void crisis. I might well have convinced you to refinance and take cover for a few years - I’ll certainly be looking very, very closely at this when we get anywhere near the next General Election……and I’ll be sharing my thoughts here, of course!
Scenario B: The Left-Wing Coalition (The Polanski Paradigm - Gulp)
Now, let's flip the coin. What if the collapse of the centre-left forces Labour into a coalition with a surging Green Party, effectively handing the ideological steering wheel to Zack Polanski and the radical left?
Housing & Property Policy:
This is the command-and-control scenario. The PRS would immediately be treated as a hostile entity. We would surely see the immediate introduction of draconian, national rent controls via “stabilisation” tied to inflation (or lower). The new rights to recover possession for the landlords may well be diluted again. EPC mandates would be brought forward - likely demanding a 'C' or even a 'B' rating by 2030, enforced by massive fines or the inability to let the property. We would also see the introduction of severe wealth taxes, potential aggressive Land Value Taxes (LVT), and the removal of any remaining tax reliefs for private landlords (forget your 20% tax credit on mortgages on the blisteringly unfair Section 24 - it can get worse).
Gilts and Mortgages:
Ironically, the bond market reaction to a Polanski-influenced government would be at least as bad as the reaction to Farage in the “giveaway” scenario, but for different reasons. The Greens demand hundreds of billions in state borrowing for the "green transition," mass social housing construction, and the nationalisation of utilities.
When the Treasury attempts to issue that volume of gilts to fund a radical socialist agenda, international capital will flee. Yields will gap upwards, sterling will tank, and the Bank of England will be forced to hike base rates aggressively to defend the currency. Once again, swap rates explode, and mortgages become cripplingly expensive.
The Landlord Opportunity:
How do you allocate capital when the state is actively trying to regulate you out of existence? You pivot, and you make the state your customer.
Under a left-wing coalition, the private rental market becomes too legally toxic and rent-capped to generate a commercial return. The opportunity shifts entirely to State-Backed Leasing. You lease your properties directly to local authorities, housing associations, or government refugee/asylum programs. Why? Because the state guarantees the rent (often index-linked), covers the voids, and handles the maintenance. If the government is going to mandate massive green compliance and cap private rents, you force them to underwrite your yield. Furthermore, any property that already boasts an EPC 'A' or 'B' rating becomes a premium asset, easily offloaded to institutional funds who need to hit ESG targets. I’m starting to position more and more of my asset base in this direction anyway - it’s comparatively more attractive in the world of the Renters’ Rights Act anyway, and it prepares for the future.
The Ultimate Takeaway:
Whether the political pendulum swings to the populist right or the radical left, the macroeconomic plumbing yields the same result: extreme volatility in the bond markets, higher gilt yields, and punishingly expensive mortgage debt. The era of cheap borrowing papering over bad property deals is dead. To survive the next parliament, you must stress-test your debt to the absolute limit, keep your LTVs low, and be prepared to pivot your tenant demographic overnight. The middle ground has vanished; as an investor, you must be equally ruthless. I’m sure that hasn’t cheered everyone up - but if you are sitting thinking either of these lead to LOWER interest rates, I really wanted to change your thinking around all of that!
Next up - The Home Builders Federation blow apart what you know about housebuilding viability:
Theme 1: The Erosion of Site Viability and Output
The Summary: Over recent years, the financial feasibility of home building has faced significant pressure. In 2020, housing supply reached an annual peak with nearly 250,000 net additions. However, completions dropped 16% to roughly 208,000 in the 2024/25 financial year, and recent indicators suggest the annual figure is now hovering around 200,000. This decline is driven by structural and economic headwinds, including rising construction costs and a growing array of levies. Cumulatively, new taxes, levies, and inflationary costs could add £76,000 to the cost of building a new home compared to five years ago. This £76,000 figure represents 20% of the average new home value of £365,000 as of June 2025. Consequently, building homes is now considered financially unviable across 48% of the country.
The Propenomix Perspective: Policymakers have long relied on the assumption that landowners would simply absorb rising development costs through lower land values. I find this view incredibly naive. Land values can only drop so far before the supply of land for housing dries up entirely. The sector is experiencing a genuine viability crunch - particularly outside the affluent South East. When developers are hit with a £76,000 bill per unit just to cover new taxes and inflation, the math simply stops working. We are looking at a market where output is hovering at 200,000 - well below any political target. Unless the government accepts that margin compression cannot go on forever without killing supply, the housing shortage will only deepen. You cannot tax and regulate a sector into higher production - it defies basic economics.
Theme 2: The Green Premium: Environmental Standards and Biodiversity
The Summary: Environmental policies are introducing substantial per unit costs to new developments. The Future Homes Standard adds £10,200 to each unit. This includes a mandate for solar panels covering an area equivalent to 40% of the ground floor space. However, analysis suggests around 60% of homes might not be able to practically meet this standard. Additionally, developers must now achieve a 10% net gain in biodiversity. While initial estimates for Biodiversity Net Gain were low, actual costs are reaching £5,700 per unit. This is partly because smaller builders are forced into an immature off site market where units are disproportionately expensive. Furthermore, nutrient neutrality rules can add up to £7,000 per unit in over a third of the country.
The Propenomix Perspective: The road to a housing crisis is paved with good environmental intentions. No one argues against greener homes or protecting wildlife - but the delivery mechanisms are fundamentally flawed. Mandating 40% solar coverage when 60% of sites cannot practically support it is a classic example of Whitehall policy detached from ground level reality. Then there is the Biodiversity Net Gain fiasco. Instead of costing a few hundred pounds , developers are shelling out £5,700 per plot. Small and medium builders are particularly penalised, forced to buy off site units in an unformed, expensive market. These green premiums are acting as a massive, stealthy land tax. If the government wants 10% biodiversity gains alongside volume housebuilding, they need to subsidise the transition - not squeeze the builders.
Theme 3: Building Safety and Regulatory Escalation
The Summary: Regulatory compliance and safety measures have significantly increased development costs. A combination of updates to Building Regulations - including water efficiency, accessibility, broadband, and EV charging - adds £7,770 per unit. The impending Building Safety Levy, set for October 2026, adds another £2,320 per unit on average. This levy aims to collect £3.4 billion, despite the industry already committing £7 billion towards safety costs. For high rise buildings, the costs are even steeper. Developers face an additional £272 per unit for Building Safety Regulator approvals. Furthermore, reforms requiring second staircases in high rise buildings are estimated to add up to £22,000 per unit , disproportionately impacting developments in London and other urban centres.
The Propenomix Perspective: Safety is paramount - but the Treasury is treating the sector like an infinite piggy bank. The industry has already committed £7 billion to remediation , yet the government insists on a new Building Safety Levy to extract another £3.4 billion by end 2026! Furthermore, calculating this levy based on gross floorspace means developers are taxed on unsaleable areas. Add the £22,000 per unit cost for second staircases in high rises , and apartment schemes in London become virtually unviable. The aggregate regulatory burden - £7,770 just for EV chargers, broadband, and tweaked water standards - is suffocating. You cannot relentlessly stack well meaning regulations on top of a volatile market without breaking the underlying business model.
Theme 4: The Unrelenting Inflation of Materials and Labour
The Summary: Over the last five years, material and labour costs have increased rapidly due to factors like Brexit, the Covid pandemic, geopolitical upheaval, and supply chain pressures. The combined impact of these increases equates to £37,000 per unit. Specifically, inflation on building materials has surpassed 40% since 2020, contributing an additional £28,500 to the construction cost of a new home. Meanwhile, labour costs have risen by 23%, representing an average increase of £8,500 per property. Alongside these construction costs, broader economic changes have also impacted developers. Increases in employer National Insurance and Corporation Tax, including the 4% Residential Property Developer Tax, have added an average of £2,055 per unit.
The Propenomix Perspective: We hear a lot about headline inflation cooling - but construction inflation operates on an entirely different, far more brutal curve. A £28,500 jump in materials and an £8,500 hike in labour per house since 2020 is absolutely staggering. That is £37,000 wiped off the gross margin per unit before you even lay a single brick. Geopolitics and constrained supply chains are the culprits, but the government's fiscal response only makes it worse. Slapping higher Corporation Tax, a 4% Residential Property Developer Tax, and increased National Insurance on top is purely punitive. Capital flows to where it is treated best. Right now, the UK is punishing capital with rampant input inflation and increased taxation. It is no wonder affordable housing delivery has cratered as a result.
Next up - from the Bank of England Blog, “Bank Underground” - it should be renamed “Bank Underwater” after this one……flooding and the future:
Theme 1: The Widening Flood Insurance Protection Gap
The Summary: Currently, most UK mortgagors have combined buildings and contents insurance that covers flooding, a reality partly supported by Flood Re, which subsidises coverage for high-risk households. However, this scheme is scheduled to end in 2039. According to a model built by Bank of England staff, the share of uninsured mortgagors could rise from 5% today to between 6.8% and 10.2% by 2050 under a conservative emissions pathway scenario. This increase could leave up to 910,000 mortgagors without flood insurance. If a severe 1-in-100 year flood event occurs, the protection gap could widen substantially to 15.7%, leaving around 1.39 million mortgagors uninsured as premiums rise rapidly. Mortgagors without adequate insurance may find it harder to remortgage if lenders view these properties as higher risk.
The Propenomix Perspective: I read these Bank Underground pieces so you do not have to, and this one is a classic example of looking at a brewing storm through the wrong end of the telescope. The headline focuses on a 2050 timeline, but the real trigger is 2039 when Flood Re vanishes. Do we honestly think the market is going to wait until 2038 to re-price this risk? Insurers are already using granular, six-digit postcode-level hazard models. Once the subsidy ends, premiums in high-risk areas will skyrocket overnight, essentially rendering these properties unmortgageable long before the water actually breaches the front door. We are not just talking about wet carpets; we are talking about stranded assets. The idea that households will simply absorb these costs is a convenient modelling assumption. In the real world, households will be squeezed by premium inflation until they capitulate, leaving a massive, glaring vulnerability in the housing stock. 2034 is a key year unless the next scheme has already been agreed by then - those are the timescales to which we work in the UK mortgage market, after all, and there’s an argument that lenders should absolutely be looking at this today.
Theme 2: Localised House Price Shocks vs Aggregate Calm
The Summary: A reduction in insurance coverage could cause risks to shift across the economy, potentially leading to lower house prices as prospective buyers factor in higher insurance costs. The model indicates that aggregate house price falls would be relatively small, estimated at around 1% to 3% in a central case, or 3% to 5% following extreme weather. These aggregate figures are much lower than the 15.6% year-on-year drop witnessed after the global financial crisis. However, these national averages obscure significant regional impacts. Following a severe flood event, as many as 18% of mortgaged properties could see price falls greater than 10%. Furthermore, under conservative assumptions, almost 3% of mortgaged properties could experience value collapses exceeding 30%.
The Propenomix Perspective: The Bank loves an aggregate figure because it helps everyone sleep at night. "Only a 1% to 3% drop nationally" sounds perfectly manageable. But property is not a national asset class - it is intensely local. Telling a homeowner in a flood zone that the national average price is holding up is like telling a man whose feet are on fire that his head is perfectly cool. A 30%+ localised price wipeout destroys equity entirely for anyone who bought with anything less than a massive deposit. When you look at the mechanics, buyers are not just going to discount the purchase price by the net present value of higher insurance premiums. They are going to walk away completely. If a buyer cannot secure affordable insurance, their high-street lender will not advance the mortgage. The pool of potential buyers shrinks to cash-rich yield-chasers, and that is when you see the true, chaotic price discovery the model is glossing over.
Theme 3: Bank Solvency and Systemic Risk
The Summary: The aggregate impact of these insurance protection gaps on mortgage lenders is estimated to be small when compared to previous financial crises. The model suggests this benign aggregate result is supported by the fact that the vast majority of UK mortgages held by banks possess a loan to value ratio below 70%, which insulates mortgages from house price falls. Additionally, because flooding is a geographically bound risk driver, large local impacts average out to smaller impacts at the national level. However, the model highlights that in higher flood-risk regions, such as the North West and North East of England, mortgage impairment rates could be nearly four times the national average. Protection gaps could ultimately pose risks to smaller lenders that have portfolios concentrated in these high-risk areas.
The Propenomix Perspective: It is reassuring to know the big boys are safe, courtesy of their sub-70% LTV back books. But let us peel the onion a bit. The systemic risk here is not about a Tier 1 bank collapsing because of some soggy collateral in the North West. The real risk is credit starvation for specific communities. If regional building societies and smaller specialist lenders take a hit because their geographic concentration puts them in the crosshairs, they will pull up the drawbridge. We will see red-lining by stealth. Lenders will not explicitly ban lending in these postcodes; they will just quietly tweak their risk models, demand higher yields, or require LTVs that first-time buyers cannot possibly reach. The model admits it does not capture the indirect impacts on consumption or macro contagion. Once capital abandons a town because the housing stock is uninsurable, the local economy hollows out. The mega-banks survive, but the high street does not. The hard thing here is seeing the opportunity - normally I say “don’t worry about what you can’t control” - but that doesn’t wash here. In this case it is “avoid areas you can’t control” when it comes to flooding. Shorting Climate Change isn’t overly attractive, in my book, and if you were keen to do that - there’s far better ways than through property - the opportunity exists after the event (if you feel you have a calculated edge) - not before, when it just isn’t being priced in adequately (in my book!).
OK. Last but not least - the heavyweight think tank the IFS have prepared the following working paper, regarding how the market values Energy Efficiency Measures. A huge topic which politically simply isn’t being looked at in the right way at this time by the former leader of the party and Sec. State for Energy, the fratricidal Mr Milliband.
Theme 1: The Premium for Energy Efficiency (and the London Factor)
The Summary: Research into the housing market response to the 2011 EPBR amendment reveals that buyers are willing to pay a measurable premium for energy-efficient homes. Nationally, properties boasting a 'B' rating on their Energy Performance Certificate command a premium of between 1% and 3% compared to baseline 'C' rated properties. Conversely, 'D' rated homes face a price penalty of approximately 1.3%. This trend is significantly magnified in the capital. London properties with a 'B' rating achieve a massive 6.5% premium, while 'D' rated stock suffers a 3% penalty. The study isolated these figures by examining transactions in England and Wales within a one-year window around the policy's implementation, ensuring the observed shifts in willingness to pay were directly linked to the heightened visibility of energy efficiency credentials at the point of listing.
The Propenomix Perspective: Right, let us cut through the noise. A 6.5% premium in London for a 'B' rating is not about buyers suddenly discovering their inner eco-warrior. It is about cold, hard asset protection. With SONIA swap rates where they are and gilt yields bouncing around, nobody wants to be left holding a distressed asset that requires fifty grand in retrofitting just to make it legally lettable. The London market is heavily skewed towards investors and the private rented sector, and those landlords were simply pricing in future regulatory risk. They are paying a premium today so they do not have to deal with the headache tomorrow. The national premium of 1% to 3% is cute, but the London figure shows us what happens when professional capital front-runs government policy. It is a classic risk premium disguised as green goodwill. Let’s not forget it is not only a bigger percentage in London, but the absolute figures are a lot higher in the first place as well. We could reframe this as “London is the only part of the UK where it actually stacks up to pay for the EPC improvements yourself”, if we so desired.
Theme 2: The Power of Salience (Or Why Buyers Do Not Read)
The Summary: A key finding of the research is that the design of information disclosure matters independently of its actual content. The 2011 policy did not create new energy data; it merely mandated that the headline EPC rating be prominently displayed on all marketing materials at the point of listing. The study proves that buyers responded aggressively to this highly visible headline rating, but entirely ignored the more detailed energy attributes buried within the full certificate, which was available both before and after the reform. By simply shifting the timing and prominence of the information, the government successfully altered buyer behaviour and valuation models without changing the underlying facts about the housing stock.
The Propenomix Perspective: I have been saying this for years - nobody reads the small print. If you want a buyer to value something, you have to hit them over the head with it on page one of the Rightmove listing. This report proves that the market is inherently lazy. Buyers are perfectly happy to stump up thousands of pounds extra for a shiny green 'B' on the brochure, but they cannot be bothered to click through to page three to find out that the boiler is actually fifteen years old and the floor insulation is fictional. From an investment strategy perspective, this is a masterclass in market psychology. You do not necessarily need to build a thermodynamically perfect house; you just need to ensure the headline EPC rating hits the magic letter. It is all about the optics, and the optics are what drive the valuation. One word….Solar (always evermore attractive during each energy crisis, and battery tech has moved forward a long way). If you are considering it for HMOs, check out Costco if you haven’t already (other providers are available, I’m not on commission either….)
Theme 3: Capitalisation over Consumption (The Investment Reality)
The Summary: The observed price premiums for better-rated properties significantly exceed the present value of the actual energy savings buyers will enjoy. Under a pure consumption model, the extra amount paid for an energy-efficient home should roughly equal the discounted value of future reductions in private energy bills and monetised carbon emissions. However, the data shows that in almost all scenarios, buyers are over-capitalising these savings. This divergence indicates a substantial investment component is driving the market. Forward-looking buyers are not just calculating their monthly gas bill; they are placing a heavy weight on the expected future resale value of the property, knowing that a superior EPC rating makes the asset more desirable and valuable in the long run.
The Propenomix Perspective: Here is where the academic theory meets the brutal reality of the property market. Buyers are paying premiums that far outweigh any logical calculation of energy savings. If you are paying thirty thousand pounds extra for a London flat just to save fifty quid a month on your heating bill, your yield calculations are completely broken. But that is not what is happening. Buyers are not paying for cheaper heating; they are paying for liquidity. They are terrified of being stuck with an obsolete, unmortgageable 'D' rated money pit when the time comes to sell or refinance. They are buying a 'B' rating because it acts as an insurance policy against future market illiquidity. As an investor, you have to recognise that this over-capitalisation is a feature, not a bug. It is a stark reminder that fear of obsolescence is a far stronger driver of capital deployment than the promise of a lower utility bill. Any smart buyer always considers who they will sell the asset to in the longer term - it’s just good decision making.
Theme 4: Supply Dynamics and the Fading Premium
The Summary: While the national premium for 'B' rated properties remained elevated and stable over time, the London market exhibited a markedly different medium-term dynamic. By tracking dynamic treatment effects through event study estimates, researchers found that the initially massive 6.5% premium for 'B' rated homes in London eventually attenuated and disappeared in the medium run. This compression of the equilibrium price differential suggests that the substantial initial premium triggered a robust supply-side response in the capital. The relative supply of 'B' rated properties increased much more sharply in London than nationally, bringing supply into balance with the newly stimulated demand and subsequently eroding the initial price advantage.
The Propenomix Perspective: This is my absolute favourite part of the data. What happens when you dangle a massive 6.5% artificial premium in front of London developers and flippers? They build and retrofit to that exact standard, flood the market with 'B' rated stock, and completely crush the premium. It is the most beautiful, predictable example of supply and demand working in real time. The national market lacked the margin to justify the heavy capital expenditure of retrofitting, so the premium stuck. But in London, the incentive was simply too juicy to ignore. For anyone deploying capital today, the lesson is glaringly obvious. You cannot build a long-term investment strategy around a regulatory premium that has low barriers to entry. The moment a feature becomes highly valued, the market will over-supply it until the margin vanishes. Always look for the structural supply constraints, because regulatory arbitrary premiums are fleeting. This applies as much to creating HMOs in non-article 4 areas, as it does to the world of Short Term rental, as to theoretical EPC premia.
As we get towards the end for this week - I can’t wait for our next workshop in London on 1st July. The VIP dinner afterwards, last time out, set new standards afterwards in terms of its length, breadth and depth of conversation. Don’t miss the next one! Due diligence is the topic, and this is broader than how you are being measured by others, just as how you should measure others; we include deal due diligence - deals, partners, companies and counterparties including lenders and borrowers. The full gamut. The live DD exercise - how I do it, no stone unturned - is always very popular and adds value (and has even had predictive value in terms of just which smoke-sellers one should avoid, in past workshops…..)
We always have real life case studies about our own experiences, and close with our “no-holds-barred” Q+A. The VIP dinner for this one will sell out once again, without doubt. Get access to Rod and myself afterwards to discuss your individual and unique circumstances over dinner. Book your tickets for Wednesday 1st July, Central London at: www.tinyurl.com/pbweleven
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 increasing inflation, the big bull run needs some runway first (although let’s see what the FCA and PRA do around continued easing of lending requirements) - now it’s time to deal with the consequences, both intended and unintended, of the Renters’ Rights Act. The fundamentals haven’t changed - there’s a shortage of 2-3 bed terraces and semis, there was 15 years ago and it has only got worse since then. “Investing in property” is not a guaranteed win. Investing in undervalued areas, sexy on the spreadsheet, strong yields - that’s as close to a guarantee as you will get in any game, which will also ensure you keep pace and indeed stay ahead of inflation. KCCO!