"We are navigating a global economy that is structurally different, not just cyclically delayed. The old playbooks will not work." - Mohamed El-Erian
This week’s quote pertains to the current state of play when it comes to the interest rates and upcoming central banking decisions.
As the calendar advances through the Golden Quarter, our next Property Business Workshop is live and tickets are already selling. This is about structure, and exit - yours, and others. No exit plan? You go out one way or another. Things have changed, as well, with pensions being brought into the scope of your personal estate. What does this mean for SSAS - according to people that use them, but don’t sell them - an objective viewpoint. Book in on the next Property Business Workshop with myself and Rod Turner - Wednesday 22nd April - Central Manchester - www.tinyurl.com/pbwten
Trumponomics - The War rolls on. Volatility is the watchword. Oil posted large single and small double digit gains and losses on various days. The market can’t make its mind up. A recent podcast I listened to (The Rest is Money, if you are interested) - featuring probably the most pre-eminent economist on the planet, or at least the one who is most proud to call himself an economist, Mohamed El-Erian - his take was that the market give this war an 80% chance of ending with a relatively swift return to “business as usual” without lasting consequences. MEE himself suggested that a more accurate assessment would see that probability closer to 50%. A coinflip. Both he and Peston don’t think the market is being bearish enough - but Peston is a permabear in these situations generally.
Alongside this, the US Trade Representative started an investigation into 60 major economies including the UK, looking for “forced labour” and “manufacturing overcapacity”. Read - excuses or reasons for more tariffs. Tariffs are being removed on goods under $800 from the US side, but the UK side are still looking at implementing them (which would have to be inflationary to an extent, which likely can’t be afforded at the moment). This move had been praised, however, to protect domestic producers of cheaper items. A week (or two) is a long time in politics.
Tariff fatigue is being ascribed to 33% of companies according to the British Chamber of Commerce - basically delaying investment decisions. Trump hasn’t said anything directly nasty for a few days, although he’s said plenty of late - Starmer continues to prefer more traditional diplomacy.
What we can’t miss is the US’s latest solution to the fallout of this conflict - a 30-day waiver on 128 million barrels of Russian oil currently stranded at sea. About what goes through the Strait of Hormuz in a week (not all from Russia). $12.8bn (at $100/barrel) into the Russian coffers, alongside anything else. We seem more obsessed with prices at the pumps, which is - in my opinion - navel-gazing extraordinaire, bearing in mind what’s going on. But it must be nice to have that as our biggest problem?
This is a US exemption on the sanctions - not a global one - so that is not simple, to say the least! Good luck to the lawyers…….
Let’s just TRY and do something that it seems no-one else is doing. Let’s assume Trump isn’t stupid. He’s hurt China by capturing Venezuela - and from a neutral standpoint, if you accept America as the strongest global power - which they are - you have to concede that the current Venezuela situation is more acceptable than it was a few months ago. Too close to home to be a China puppet. Stay with me.
Buoyed by the easy extraction, and listening to their own rhetoric a bit too much, then comes the “Putin move”. “Yes sir, we will be in and out of there in a week, and it will all be done. The regime will fall, and the people will rise up as they’ve been trying to do”. Except they haven’t. However, hurting Iran also hurts a Chinese supply of cheaper oil as well. Two major blows. And what do China do - remain silent?
So - is Trump thinking he can “turn” Russia, and get them onside? AND end the Ukraine conflict all in one go? This is incredibly high-risk, daring, and nuts - all at the same time. AND hurt the only real rival the US has in the world, because he really does very much care about supremacy and being number one?
Too many conspiracy theories and podcasts? (Not really, I really haven’t absorbed that much on the subject. This is all my own work). All I’m doing is looking for what they might be thinking, because I think there’s some kind of plan, even if it might seem quite crazy. I know one thing for sure - no wonder he was in such a hurry to get the Nobel Peace Prize last year, now…….
We retreat to the safety of the UK real-time property market. Chris Watkin’s analysis/roundup of week 9 of the UK Property Market. Chris “runs” Sunday to Sunday, so this was the week ending 8th March. We stay ahead of 2025 in listings for one MORE week - just about - so far (322k on the market so far is 1% above 2025 and 9% ahead of 2024, and 20% ahead of the 2017-19 average). The glut of listings is persisting - how much longer can we blame the budget for, in terms of disrupting the supply pipeline? What we know is that there’s extra stock on the market - it must be landlord disposals - but we don’t know exactly who is buying them, although first time buyers are especially active and there’s only so many houses, of course……..listings are 13.2% higher, year-to-date, than the 10-year average (at the moment). And - remember only a little over HALF of what’s listed actually sells (unbelievably).
Gross sales are at 219k SSTC YTD, 9% higher than 2024 but 5.7% lower than 2025. The lack of that 31st March deadline, the urgency, and the time pressure will likely wash out by the time we get to the end of H1 of this year - because we know that last year’s figures had a peak and then a trough, as you always do around a stamp duty change/hike. April 2026 should be drastically superior to April 2025 - we know that. The reason why pricing is sideways is because there is just so much supply, but transaction numbers still look very healthy indeed. Functional. Prices dropping in real terms (after inflation). Affordability improving. Everyone is happy (although those of us who benefit significantly from capital growth would mostly prefer it was faster, of course!).
Net sales are also 8.6% ahead of 2024, at 171k. 15% ahead of the 2017-19 market, and 25.3% ahead of 2023 which as we know was “limp lettuce” territory all year. 4.5% lower than 2025, though, with reference to the above caveats.
To start March there ended up being a 10-year+ record number of homes on the market (for a March, to be clear - we haven’t yet ascended or beaten the peaks set in 2025) - 682k thanks to this record Boxing day and solid January/February - 2025 Mar 1st saw 675k OTM, so it is 1% above that - a hair’s breadth.
Sales pipelines are, however, a few percent below where they were 12 months ago. At the end of Jan 2026 agents had 422,067 properties sold subject to contract - that compares to 433,030 at end Jan 2025, 353,395 at end Jan 2024, and 459,094 at end Jan 2021.
Reductions were back over 25k - 25.5k for the week, 11.4% of stock was reduced in February, compared to the 2025 average of 12.8% (and the longer average of 10.74%). The fall-through rate is nice and low at the moment; 21.5% in week 9, (longer-term average 24.2% - all far too high of course, but all numbers have to be looked at in context of the “norm”).
February ‘26 saw sales agreed averaging £343.36, 2.3% ahead of a year ago. Much closer to the current ONS numbers. This number is 18.2% ahead of 5 years ago - February 2021 was really accelerating very fast in terms of pricing and a huge slice of that 18.2% happened in that one year. We will keep monitoring. Exchanged prices were well above this for the month - £339.57 per foot, which is a big move down from £348 in January. These deals were likely agreed BEFORE the November 2025 budget, or around it - so it makes sense for them to be a bit lower. Let’s not read TOO much into one month’s figures though, as I always say.
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!
Week two of March, and we have the RICS Residential Market Report, the GDP Growth report for January, and then the Zoopla/Hometrack UK Rental Market Index. Dessert for the macro feast is the gilts and the swaps, as usual (that slot isn’t going anywhere anytime soon).
February’s market report from RICS, then. Never happy - and the strapline (pre-Iran, remember) was that market confidence remains fragile. They did describe intensifying macro headwinds “clouding the outlook”. “Buyer demand dips amid renewed concerns over the interest rate outlook”. Let’s pause on that one.
What sense does that make? If you think that rates might go up from here, do you then NOT buy a house? Don’t you get on with it and buy one? The 2-year pricing is important to first-time buyers - they LOVE a 2-year - being optimistic, thinking they will get capital growth and/or might move in a couple of years time - and that going “wonky donkey” over the past couple of weeks won’t help - but that is February. Are you really buying at the moment when you think the rate is going down over the next 12 months but the market (pre-Iran) thought 3.75% base rate in 3 years time and 4% in 5 years time (I know no-one ever SAYS that, but that’s where the OIS/forward curves were, before this all blew up, if you give me the poetic licence).
“Headline House Prices remain broadly flat, albeit regional divergence is evident”. You know what this means. I’ve made no secret for years now that the North is drastically outperforming the South. The last of the sub-straplines - “Forward-looking sentiment turns more cautious, even though twelve-month expectations remain positive”.
At the CURRENT market reaction, I see limited disturbance, frankly. I watch the swap curves as closely as anyone who isn’t a professional swap trader, or a broker, I’d think. Buyer enquiries were down in February - no two ways about it - and I do have in the back of my mind last week’s Mortgage Approval number of 60k, from the Bank of England Money and Credit report. I wonder if Iran ends up being the excuse, but the slowdown was on the way? It is looking a bit like that - this seems like one more potential piece of evidence.
If you are down in the South East reading this, you might spit the coffee out at this point, and I wouldn’t blame you. “Slowdown - it’s already bloody slow mate” (said in appropriate London/Kent/Essex (other counties are available) accent). It would be a fair comment. But it’s all relative, remember. It always is.
The rental side still sees landlord instructions “comfortably” down, with a balance of -27%, and +20% still see rents moving upwards over the next 3 months - although we have had some evidence to the contrary this week.
To an extent, more of the same, but we need to keep our eyes on these reports. That was written with some reference to the Middle East that simply wasn’t on the radar when the data for that report was collected - which is a bit methodologically naughty, to say the least. Noted, RICS. I’m always watching.
Growth then? I can’t do another magnifying glass gag. The year-on-year growth figure, just after I’d had my humble pie for getting it wrong in 2025, printed 0.8% on the year - smack on my prediction after the 2024 budget. I was a month out. January looked so good in the PMIs, though - so this was a bit of a surprise, to print 0% for growth. Inflation had abated. The economists expected 0.2%, and so it was a sizable downside miss.
The scraps? There was a revision upwards in the 3-months to November, from -0.1% to 0%. Something down the back of the sofa there. A few billion. Services grew 0.2% in the quarter, production 1.3%, but construction shrank by 2%.
What can we pull out from the report below the straplines? Employment activities down 5.7%, the largest single-industry negative contribution to real GDP growth in January 2026. Not a great start to the year for the jobs market, according to the ONS. From January 2024, the index for employment activities is down 8.1%.
Getting into construction figures in detail - the index on new work is still 6.9% down on 2023’s activity levels. Repairs are up 12.6% by comparison - repair, don’t build new looks like the “solution” being followed at the moment.
Miserable alongside a PMI of 54 for January. It doesn’t always fall together. However - let’s remember one basic thing that a few commentators often forget (or don’t know in the first place). GDP is quoted AFTER an inflation adjustment. “Real GDP” is the technical term. This is a rarity and that’s why it catches some people out. Most figures are quoted nominally.
However - when inflation goes up in a surprising fashion - as it is surely doing at the moment (or perhaps just won’t go down as much as expected in April - remember some organisations were saying we would be back to 2% for April’s figures) - then it catches people out, and agreed wage rises weren’t where they thought they might need to be now fuel is racing upwards, and household bills will follow in July at this rate. It also gets subtracted from the Nominal GDP figure to get to the most-quoted Real GDP figure. So growth might be 4.5% underlying - but if 4% is the inflation number, real GDP is more like 0.5% (and that scenario, right now, won’t sound too unlikely).
Wars can increase GDP, but at a cost - defence spending, which is ever more critical in the world of the 2020s, does not historically provide great returns to the Treasury (compared to infrastructure investment, which does provide a multiple). More debt, more lag, less performance.
Well, that cheered everyone up, especially Rachel. Moving on to the Hometrack Rental Market Index. Their inflation on new lets in the UK? 1.9%. Rental demand is down 14% year-on-year. Panic (Not really. Not yet). 11% more homes for rent year-on-year, we are told. Panic now? (Still not yet).
What’s going on? The rental market is “moving towards better balance” - I’d agree with that - demand down, supply up. Enquiries per property at a 6-year low of 4.8 (this was 6.5 12 months ago). Rental supply is still 23% below pre-pandemic levels (ah, there’s the soother). Weaker demand is driving a slowdown, but more supply is still needed to deliver long-term improvements for renters, according to Zoopla/Richard Donnell (I’d agree).
So what’s with the big year-on-year shift? I thought landlords were selling? Well, net migration is down really sharply (I even heard one IFS podcast suggesting it might be negative at the moment). First time buyers are up, as discussed many times here recently - 75% of FTBs are renters. Supply is also up because some who can’t sell their homes (remember these ridiculous stats that only 55% of listings actually sell) turn to renting them out as an alternative.
Earnings are rising twice as fast as rents, improving affordability. That’s helping of course. 20 days to rent a property looks bad compared to 13 or 14 in 2022 and 2023 - when people preferred to rent to take cover from mortgage rates, and also migration was very high indeed - but in the “stable old days” it was 23/24 days. This is from listing to “let agreed”, for reference.
Zoopla measures the rent for a typical property versus average gross annual earnings for a single person. We could argue that methodology, but as long as they are consistent over time, we can run with it. That’s 33.5% at the moment, outside London, compared to over 35% in 2023 (which was a 20-year high). The long-run average is 33% (so, the rhetoric over rents being “crazy”, “unaffordable” and the likes is just that - rhetoric - as usual). The expectation from the team at Zoopla is that rents will grow more slowly than earnings in 2026 once again, improving affordability further.
Liverpool and Newcastle win the Zoopla rent rise prize - at 4.6% and 4.5% respectively. Bournemouth, Nottingham and Birmingham (unusual bedfellows) all posted lower rents compared to 12 months before - between 0.7% and 1.1% lower. Remember these are ASKING rents, not actual rents.
The Zoopla figure for 2026? 2-3%. A good report as always, with conclusions well explained and defended in general. Always worth a read.
Gilts and swaps? We have to. Monday started with a bloodbath - those of us on the redeye to MIPIM (highly recommended actually, was far better than I thought it would be) were sweating the swap rate on landing, even though there wasn’t anything that could be done about it. It was looking parabolic and at least 3 SOS messages have been out this week saying “lock in your prices now”. Mine went out last week, and I had a few messages thanking me for highlighting it - not quite the 2022 rate call, but it sounds like it saved a few people a few quid, and that’s the objective. Just like the oil at the pumps, there’s money in the lenders’ tanks that was secured at prices below the current market price - but like the garages and the supermarkets, they look at replacement cost rather than net stock cost (and yes, they pocket the difference). A shoutout to those who were so generous this week with their time and their networks as I broke my MIPIM duck - you know who you are, and I know you are reading - thank you!
The black armbands stay on from last week - 4.231% yield on the 5-year at the open, 4.35% at the close. VERY volatile - we had a dip back under 4% on Tuesday, after a big rally and a drop in the oil price - but that was short-lived. 12 bps on the fire for the week - an eighth of a percent.
The 30s lost exactly the same amount of ground. 5.381% on the open, 5.501% on the close. Back above that 5.5% handle. Chunky. But - back to the growth section - these are NOMINAL yields, in a time where inflation might scream forward, especially if Mohamed El-Erian was right with his analysis above.
Real world - these yield curves look almost identical to 12 months ago. So - we’ve lost the downward momentum, and lost the progress we’d made in the past 12 months. The 30s look bad in all worlds - back near that 20+ year high - but the 5s are still about 1.3% below the 2007 highs.
As everyone loves a lettuce comparison - here’s the important tale of the tape. The 5 year gilt yield moved from 1.776% on 1st July 2022 (when some of us were screaming - TAKE THE PRICE - ahem) to 3.971% on 1st October 2022 (when the lettuce was in full swing and just about still in charge). That’s intergalactic. Here we’ve gone from trading in that range of 3.75% to 4% up to 4.35%. In context - that’s a minor tremor. Still higher than when Liz was in her pomp - but those sorts of moves are meteoric and you might remember just how many products were pulled or repriced dramatically during that time.
The shorter dated bonds are more volatile though, and the 2s are relevant as I know some want to look at 2-year fixes. The 2s have gone from 3.51% all the way to 4.141%, a slip of nearly 65bps, since the end of Feb. In 2007 that was over 5.75%. Nasty but not terrible.
There’s only one more thing to say there - Keep Calm and Carry On. If your business model is built on waiting for cheaper debt - I’ve been saying it for years now - move on. Change the model. Kill or cure. Kill = sell, cure = asset manage effectively. This is the new world, and as I’ve been saying for 5+ years here at this point - the risks remain to the upside.
One slight rider, though. Never waste a good crisis. You’ll have heard that phrase before. The Labour Party is busy wasting it. As usual. What good ideas did I hear this week? War bonds would be a workable one. Debt with a specific purpose. How to incentivise domestic investors? Those who live in the UK get them inheritance-tax free. I struggle to see the downside of these. Just don’t sell them all as “linkers” (index-linked, to inflation)......for goodness sakes.
How about the swaps? Last traded Thursday 12th March - 3.991%. 12 months ago - 3.964%. The same story. One month ago? 3.589%. 40 bps slippage on the 5 year. 51bps on the 2 year within a month.
OK - that’s the technicals. What now for the interest rate? Well, buckle up folks. We might have seen the last rate cut for this cycle. Or if you prefer - the next move the Bank of England makes might be a rate hike. Either way - don’t panic. This is more about signalling doing the right thing to the Bond markets, and not being afraid to stop the cuts and doing a hike, than it is anything else.
El-Erian thinks the central bankers' only option is a rise in the UK. In the US, they can hide behind their second mandate around unemployment, because they are not having a great time on job figures there either. He thinks you could see rates up in the UK relatively soon (perhaps the May meeting) and rates DOWN at the Fed meeting around the same time, based on the mandate differences. Don’t brush this one off as “follow the Fed” but what looks unlikely now is a rate cut this month. If we did, mortgage rates would go UP, not down, because the bond markets would be questioning the wisdom of the central bank.
Prepare for May’s Bank of England monetary policy report, that’s all I’ll say…..
OK - masks on for the deep dive. We look, as has become more usual, at four different reports. Firstly, a summary of the slide deck produced by Neal Hudson at Builtplace (A highly recommended resource), that is based on the Mortgage Lending statistics. Then, a look at capping ground rents and who really benefits (from a lobby group/interested think tank, granted). We then take in a recently released report from LPDF and Savills about introducing demand support (think “help to buy”) and finish off with a summary of a newer ONS report about the current state of the UK economy, which I thought would provide some helpful and objective commentary since I regularly get frustrated with people misquoting how we are actually doing as an economy.
The MLAR statistics for Q4 2025, then:
Theme 1: The Resurgence in Gross Lending Volumes
The Summary: According to the Bank of England and FCA MLAR statistics, gross mortgage advances reached £296 billion in the year to Q4 2025. This figure is marginally higher than the Bank of England's own gross lending statistic of £291 billion for the same period. Looking specifically at the final quarter, gross advances in Q4 2025 saw a 15.4% increase when compared to the same quarter in the previous year.
New commitments reflect a strong focus on property acquisition, with 63% of these commitments designated for house purchases. A breakdown of the gross advances by value during Q4 2025 highlights that First Time Buyers accounted for 28.6% and Other Owner Occupiers made up 33.0%. Remortgaging activity stood at 25.4%, whilst the Buy to Let sector represented a much smaller 8.4% share of the total.
The Propenomix Perspective: Let us cut through the headline euphoria immediately. A 15% year-on-year jump in gross advances looks fantastic on a spreadsheet, but we must contextualise this against the wider macroeconomic reality. We have experienced significant inflation, meaning we are lending substantially more nominal currency just to facilitate a similar underlying volume of housing transactions.
The glaring red flag in this dataset is the Buy to Let figure sitting at a paltry 8.4%. This is a sector practically on its knees, battered by years of tax changes, legislative hostility, and higher swap rates eroding yield margins to the point of irrelevance. We are witnessing a structural shift in housing provision - the private rented sector is shrinking because the basic maths simply does not work for leveraged investors anymore. Capital is absolutely being deployed, but it is heavily skewed towards owner-occupiers, meaning the rental supply crisis is only going to deepen.
Theme 2: The Risk Profile - LTVs and Income Multiples
The Summary: The Q4 2025 data reveals a notable shift in borrower risk profiles and lending multiples. During this quarter, 7.8% of gross advances were issued at a loan-to-value ratio of 90-95%, marking the highest share for this specific bracket since 2008. However, lending at the extreme end of the spectrum remains heavily restricted, with advances over 95% LTV sitting unchanged from the previous quarter at just 0.5%.
Income assessment metrics demonstrate a growing reliance on dual incomes, with joint income borrowers accounting for 60.4% of gross advances in Q4 2025, a significant rise compared to 50.1% in Q3 2007. The proportion of regulated gross advances issued at three times a borrower's income or over has rebounded to 60.4% in Q4 2025, having previously dropped to 54.1% in Q1 2024. Meanwhile, loans where income was not evidenced accounted for just 0.1% of the market in Q2 2025.
The Propenomix Perspective: I can already see the mainstream press salivating over the "highest 90-95% LTV lending since 2008" narrative. Let us take a breath and look at the reality. Comparing today's stringent affordability stress-testing to the pre-credit crunch wild west is intellectually lazy. The fact that non-evidenced income loans are virtually extinct at 0.1% tells you everything you need to know about the regulatory fortress lenders now operate within.
What truly fascinates me is the joint income dependency hitting 60.4%. Affordability is stretched so tight that the single-income homebuyer is rapidly becoming a mythological creature. To get on the housing ladder today, you generally need two solid incomes and a heavy multiple just to make the numbers stack up. The recovery in loans above three times income indicates that buyers are capitulating to the new normal of higher borrowing costs. They are absorbing the pain and leveraging up regardless, likely because the alternative - renting in a highly competitive, supply-starved market - is even worse.
Theme 3: The Fixed-Rate Fortress and Arrears Reality
The Summary: Fixed-rate products continue to dominate the UK mortgage landscape, comprising 93.2% of gross advances in Q4 2025. While this represents a slight drop from the 95.5% peak recorded in Q3 2022, it has pushed the total proportion of outstanding balances on fixed rates to 89.8%. Consequently, the average mortgage rate across all outstanding balances has climbed to 4.09% in Q4 2025, up from the record low of 2.14% seen in Q4 2021.
Regarding financial distress, the number of new loan accounts falling into arrears during Q4 2025 was 14,350. This represents a 34% drop from the recent peak of 21,567 recorded in Q3 2023. Overall, total cases in arrears at the end of the quarter sat at 1.2% of total loan balances. Finally, the number of new possession cases in Q4 2025 was 2,182, which is 12.1% lower than the preceding quarter.
The Propenomix Perspective: The much-prophesied mortgage arrears tsunami has officially failed to materialise. A 34% drop in new arrears from the 2023 peak is a massive testament to the sheer resilience of the UK consumer and the flexibility of modern lenders. Banks have absolutely zero appetite for repossessions right now - they are actively deploying forbearance, term extensions, and interest-only switches to keep people in their homes.
With almost 90% of the entire mortgage book locked into fixed rates, the market has been successfully insulated from the immediate, sharp shocks of base rate hikes. Yes, the average outstanding rate has steadily crept up to 4.09%, meaning the financial pain of refinancing is slowly bleeding into the system rather than hitting everyone at once. But a total arrears figure of 1.2% of balances is structurally sound. The system is bending, but it is not breaking. Investors sitting on their hands waiting for a wave of distressed housing assets to flood the market will be waiting a very long time.
What you never see in these situations is any praise for a job well done - but the 2012 Mortgage Market Review was exactly that, because we survived the period of stress. Extreme but time-limited stress that was effectively self-inflicted by the Lettuce Budget of 2022 - and then pressure on 5-year rates around mid-2023 as interest rates truly normalized, and we got into a “new world” scenario. When 2022-2025 becomes true history rather than the recent past, commentators will look back and comment about just how incredibly resilient the UK housing market was as we moved from 2% mortgages to 4% mortgages via 6% mortgages, very briefly. It’s incredible that we’ve seen such gentle movements in nominal pricing (and inflation helped, in many ways).
Ground rents and the cap, then. Cui bono, we always ask ourselves - who benefits? Landlords, as it turns out. Make no mistake, the Residential Freeholds Association is directed by the chief exec of a big freeholder, so we don’t need to look too far as to incentives - however, this is a factual report and so I thought it was definitely worth sharing.
Theme 1: The Buy-to-Let Windfall
The Summary: The proposed £250 cap on ground rents will inadvertently benefit property investors rather than owner-occupiers. A new independent economic analysis published today reveals that the policy would deliver an estimated £8.7 billion windfall to landlords. Government data indicates that 41% of leasehold properties are privately rented. Consequently, the direct benefit of the cap falls heavily on property investors, particularly in London and the South East, which account for around 55% of the total benefit. Valuation modelling highlights staggering potential gains in prime London developments. For example, a single landlord at Hanover Terrace, NW1, could gain over £420,000. Conversely, the average leaseholder paying around £304 per year in ground rent would experience only limited savings. Lower ground rents are also likely to be reflected in higher property prices, raising barriers for first-time buyers.
The Propenomix Perspective: Look at the absolute state of this policy making. The headline objective was supposed to be a lifeline for the ordinary leaseholder battling the cost of living. Instead, it is a massive cheque written straight to wealthy property investors - many of them sitting overseas. If you are handing a £420,000 windfall to a landlord renting out a £10 million flat in NW1, you have fundamentally misunderstood the assignment. It is classic political theatre - targeting a populist villain but accidentally shooting yourself in the foot. Lowering ground rents artificially is just going to pump up the capital values of these properties, raising barriers for the very first-time buyers the government claims to support. The average owner-occupier gets pennies, while the prime London buy-to-let market gets a massive, unearned bonus. It is an extraordinary misallocation of wealth orchestrated by a fundamental misunderstanding of market mechanics. Then again, perhaps the London market needs all the pumping it can get at the moment (although does Super-Prime even move the needle in the “normal” market?).
Theme 2: The Hit to Investor Confidence
The Summary: The report, produced by WPI Strategy, highlights severe macroeconomic consequences stemming from the retrospective £250 ground rent cap. The analysis finds the policy would wipe up to £18.7 billion from the value of ground rent investments, which is equivalent to around 0.6% of annual UK GDP. Furthermore, this could reduce total UK business investment by up to £9 billion per year. This reduction is driven by investors factoring in greater policy uncertainty and higher borrowing costs. Rewriting existing contracts risks undermining confidence in the UK's policy framework. Experts warn of potential spillovers beyond housing, as investors may fear that other long-term rules and commitments could also be retrospectively changed. The Residential Freehold Association notes this risks hitting ordinary pension savers.
The Propenomix Perspective: This is where the macro picture gets genuinely terrifying. Wiping nearly £19 billion off the balance sheets of investors by retrospectively tearing up legal contracts is not just a housing sector issue - it is a sovereign risk issue. When you tell institutional capital that the UK government is happy to void long-term agreements on a political whim, you are adding a massive risk premium to every single asset class in the country. We are actively begging for £50 billion in long-term investment from pension funds through the Mansion House Accord, whilst simultaneously pulling the rug out from under them in the residential freehold market. It is incoherent. Gilt yields and borrowing costs will inevitably reflect this risk premium. If contract law is no longer sacred in the UK, why on earth would global capital park its money here? We are signalling that the UK is closed for serious, long-term business.
We must remember that I looked into this some time back, as well, and concluded about 50% of the loss being absorbed by private investors/private equity, and then about 15% being absorbed by pensioners (or as low as 10%). So that’s the other unsaid part here in the report.
Theme 3: The Threat to Housing Supply
The Summary: The proposed ground rent cap risks direct conflict with wider government objectives concerning housebuilding and economic growth. The analysis warns that investor uncertainty following the introduction of a cap could reduce annual housing starts by between 15,000 and 20,000 homes. This reduction would make it more difficult for the Government to meet its target of delivering 1.5 million homes. The Residential Freehold Association argues that retrospective changes to long-term property contracts reduce housing supply. Furthermore, WPI Strategy notes that this slow down in the delivery of new homes comes at a time when the housebuilding sector is already under pressure. Industry leaders support reform for transparency and standard-raising, provided it does not undermine economic goals.
The Propenomix Perspective: So, let me get this straight. We have a supposed target to build 1.5 million homes, and the government's own proposed legislation is projected to kill up to 20,000 housing starts a year right out of the gate? You could not make it up. Housebuilders are already strangled by planning delays, nutrient neutrality absurdity, and elevated debt costs tied to stubborn SONIA swap rates. Adding a completely avoidable hit to investor confidence is pure economic vandalism. To fund large-scale, high-density development - the exact type of development we actually need - you require forward funding and institutional backing. If you nuke the viability of the freehold investment model, the capital for new block developments simply evaporates. We are sacrificing essential housing supply on the altar of a poorly thought out headline grab. Nonetheless - it is happening and if we needed to layer anything else onto the woes of building a deemed “high-risk building”, this is certainly it! Cui bono, my friends.
Moving on to help-to-buy or other demand support:
Theme 1: The SME Housebuilder Crisis and the Two-Tier Market
The Summary: The latest data reveals a stark divergence in the fortunes of UK housebuilders based on their size. The average sales rate reported by PLC housebuilders remained relatively stable at 0.57 during the second half of 2025. However, smaller firms delivering fewer than 1,000 homes per year have experienced no such recovery in their sales rates over recent months. The mid-sized tier - those delivering between 500 and 1,000 homes annually - has been hit the hardest. From achieving 33 sales per year from an average outlet in 2021, these builders sold just 19 in 2025, representing a 40% decline. Consequently, SME developers are capturing an increasingly small share of the overall new build market. Larger PLCs are maintaining volumes by using sales incentives, a cost that smaller builders simply do not have the financial capacity to absorb.
The Propenomix Perspective: I look at these numbers and see exactly what we have been warning about for the past two years. We do not have a housing market - we have a two-tier oligopoly masquerading as one. The PLCs are floating along on a 0.57 sales rate because they have the balance sheet density to buy volume with heavy incentives. The SMEs are being crushed because the cost of capital is fundamentally broken for them.
When you look at the swap markets and commercial lending rates, debt financing for a site of 50 units is painfully expensive. If an SME cannot turn capital quickly - and at 19 sales per outlet a year, they absolutely cannot - their internal rate of return evaporates. The government loves to talk about diversifying the supply base, but until we address the prohibitive cost of development finance and the glacial planning system, the top ten builders will simply continue to eat everyone else's lunch.
Theme 2: The Deposit Barrier and the Rental Trap
The Summary: While the number of first-time buyers has reached recent highs, it remains substantially lower than the levels seen in the 1990s. The most significant barrier to homeownership continues to be the deposit, which currently equates to approximately one year's income. This hurdle has been exacerbated by the private rented sector, where rents are now 35% higher than they were in March 2020. Since the Help to Buy scheme closed in 2022, support for first-time buyers has sharply declined. Although 95% LTV mortgages are available, the ongoing costs of ownership remain comparable to market rent. To illustrate, purchasing a £300,000 new home with a 95% mortgage requires a household income of £60,000. In contrast, an equity loan scheme allowing for a 5% deposit would reduce the required income to just £43,000.
The Propenomix Perspective: This is the crux of the demand-side disaster. We are watching an entire generation run on a treadmill that keeps speeding up. Rents are up 35% because we have structurally constrained supply while simultaneously driving private landlords out of the market through punitive taxation. Where exactly are these prospective buyers supposed to find a deposit equal to a full year of gross income while paying record-high rents?
The 95% LTV mortgage product is a red herring. It exists, yes, but when you factor in stress testing and current SONIA swap rates, the monthly servicing costs are completely detached from median wages. An equity loan effectively bridges that gap by acting as a giant, state-sponsored mezzanine tranche. But let me be clear - we are essentially using financial engineering to solve a structural supply deficit. It works for the buyer on paper, but it is a damning indictment of our inability to build affordable housing organically.
I don’t think I can bear, one more time, to point out why rent compared to mortgage is a bad comparable - insurance, improvements, compliance, all included in rent - oh look, I managed it, one more time. About 135%-150% of rent would be a better proxy for an equivalent mortgage, to allow for 25%-35% “slippage” from owning your own house. Bear in mind though, in the interests of balance, that would include some capital repayment also so you would also be doing some saving (although that would be very little in the first 5 or even 10 years of a 35+ year term).
Theme 3: The Economic Pitch for Demand Support
The Summary: Research indicates that a renewed equity loan scheme could have a profound impact on both the housing sector and the wider economy. Currently, nearly one in four family households living in private rented accommodation - approximately 375,000 families - could afford to buy a home using an equity loan with a 5% deposit, but would struggle with 95% LTV mortgage repayments. The report estimates that introducing a new scheme could support up to 85,000 additional housing completions by March 2029. Economically, this boost to housebuilding could generate nearly £24 billion in additional GDP over three years. To maximise this impact, the report advises against regional price caps, noting that new build prices vary substantially even within individual regions. Instead, any caps should be set at a local authority level.
The Propenomix Perspective: Ah, the classic demand-side stimulus pitch. It is music to a politician's ears - "Just subsidise the buyers, and we will build our way to £24 billion in GDP growth." I do not dispute the mathematics; injecting that much liquidity into the bottom rung of the housing ladder will absolutely spur transactions. However, we have to look at the macro reality.
If you pump billions into demand without fundamentally reforming the supply side, a significant portion of that capital simply capitalises into higher land values and house prices. It is exactly what happened during the first iteration of Help to Buy. Furthermore, at a time when gilt yields are highly sensitive to government borrowing, creating a massive new contingent liability on the state's balance sheet is not without risk. I completely agree with scrapping regional price caps - local authority level data is the only metric that reflects reality. But we must remember that an equity loan is a painkiller, not a cure for the UK's terminal housing disease.
We finish with a roundup on the UK economy, alongside my take on it. Enjoy.
Theme 1: The Illusion of GDP Growth
The Summary: The latest data from the Office for National Statistics indicates that UK gross domestic product (GDP) is estimated to have increased by 0.1% in Quarter 4 of 2025. This mirrors the marginal 0.1% increase recorded in the preceding quarter. However, this top-level growth masks underlying weakness in individual prosperity, as real GDP per head is estimated to have fallen for the second consecutive quarter by 0.1%. Sector performance in the latest quarter was highly varied; growth was driven by a 1.2% increase in production, whilst the construction sector fell notably by 2.1%, and the services sector showed absolutely no growth.
The Propenomix Perspective: Let us cut through the noise - a 0.1% uptick in GDP is nothing to celebrate when real GDP per capita is going backwards. We are officially in a per-capita recession, meaning the average person in the UK is getting steadily poorer, despite the headline vanity metrics trying to suggest otherwise. As property investors, the glaring red flag here is the 2.1% contraction in the construction sector. While the Bank of England dithers over SONIA swap rates and the broader gilt market tries to find its footing, the reality on the ground is that we are simply not building enough stock. A shrinking construction sector in a country with a chronic, structural housing deficit only points in one direction for long-term asset values - upwards. The supply constraints are tightening, and this data proves it.
Theme 2: Sticky Inflation and Producer Costs
The Summary: Inflationary figures show a slight easing, with the Consumer Prices Index including owner occupiers' housing costs (CPIH) 12-month inflation rate recorded at 3.2% in January 2026. This represents a drop from the 3.6% rate seen in December 2025. On the production side, producer output (factory gate) prices saw an increase of 2.5% in the year to January 2026, which is down from a revised rise of 3.1% in the year to December 2025. Meanwhile, producer input prices rose by a marginal 0.2% in the year to January 2026, decreasing from a revised 0.5% rise in the year to December 2025. These input prices remain highly susceptible to fluctuations in raw material costs and exchange rate movements.
The Propenomix Perspective: The mainstream headlines will inevitably cheer the drop in CPIH to 3.2%, but I am not popping the champagne just yet. The central bank wants us to believe they have slayed the inflation dragon, but looking beneath the bonnet tells a different, far stickier story. Producer output prices are still rising at 2.5%, meaning the baseline cost of creating physical goods - crucially including the materials needed to build or refurbish property - is still compounding. This sticky inflation keeps a firm floor under how far base rates can truly fall. If you are sitting on your hands waiting for a return to the days of 1% mortgage rates, you will be waiting a very long time. The smart money is locking in fixed debt now and rigorously pricing structurally higher operational and capital expenditure costs into their portfolios. Remember - these figures are all pre-Iran and geopolitical disruption…..
Theme 3: The Labour Market Disconnect
The Summary: The UK labour market is currently presenting a mixed picture of rising unemployment alongside robust wage growth. The UK unemployment rate was estimated at 5.2% in the period from October to December 2025, which is an increase on both the previous quarter and the previous year. Concurrently, the UK employment rate was estimated at 75.0 during the same period, showing a decline in the quarter. Despite this rising unemployment, wages continue to climb. Annual growth in employees' average pay in nominal terms was 4.2% for both regular pay (excluding bonuses) and total pay (including bonuses) in the October to December 2025 period.
The Propenomix Perspective: Here is the real headache for the macro-economists - unemployment is creeping up to 5.2%, yet wage growth remains stubbornly high at 4.2%. In traditional economic models, this is not supposed to happen; it absolutely reeks of stagflation. For landlords and property developers, this scenario is a double-edged sword. On one hand, nominal wage growth of 4.2% means tenant affordability is technically still expanding, which supports the current rental market and provides room for necessary yield adjustments. On the other hand, rising unemployment introduces a very real element of systemic risk to the market. If your tenant base is heavily exposed to sectors bleeding jobs, that national average wage growth means absolutely nothing when your specific rent arrears start to spike. Focus heavily on your micro-market, underwrite your tenants rigorously, and do not rely on national averages to save a fundamentally bad deal.
Theme 4: Demand and Corporate Caution
The Summary: Looking at measures of demand within the economy, retail sales volumes experienced slight growth, while corporate investment pulled back. The quantity of goods bought in retail sales is estimated to have risen by 0.1% in the three months to January 2026 compared with the previous three months. This rise was primarily attributed to better automotive fuel sales and a positive start to the year for non-food stores. Monthly retail sales volumes are estimated to have risen more sharply by 1.8% in January 2026. Conversely, UK business investment decreased by 2.7% in Quarter 4 of 2025. However, despite this quarterly drop, business investment remains 2.0% above the level recorded in the same quarter of 2024.
The Propenomix Perspective: Consumer spending is holding on by a thread - driven largely by people putting petrol in their cars to get to work - but the real story here is the sharp 2.7% drop in business investment. Corporations are running scared right now. When businesses stop investing capital, they stop expanding, and eventually, they start shedding staff. This lack of corporate confidence trickles down into the commercial property sector first, but the residential market is never far behind. If businesses are hoarding cash rather than deploying it, it tells me they are extremely wary of the current fiscal environment and potential future tax raids. As property entrepreneurs, we need to take a leaf out of their book: preserve liquidity, ensure you have robust cash buffers in place, and only deploy capital when the underlying value is undeniable. The era of speculative, highly leveraged punts is dead. There’s almost always an alternative for businesses - wait and see. The war doesn’t change that at all - it encourages it more, and more. Woe is me? More like slow is me.
As we get towards the end for this week - our Manchester Property Business workshop is continuing to sell very well. This is a workshop in huge demand, as we talk about exits. We cover tax, risk, deal structuring and exit options - not just for you, but for those who you will inevitably be dealing with to buy assets, portfolios, companies and the likes from. Can you help with their exit? I have, over the years, often because they have no real formal plan of their own - and added massive value, getting deals over the line. Have you got children or are you planning to leave a legacy? What does your plan look like? Do the kids know about it…….they often don’t, and - spoiler alert - they often don’t want to play ball either!
As always we have real life case studies about our own experiences, and close with our “no-holds-barred” Q+A. Anything individual to consider? Get a VIP ticket and join us for dinner, in a smaller setting with an opportunity to discuss any specific roadblocks or issues in your property business at the moment. Our VIP dinner was absolutely incredible in January, and got some superb feedback - the upgrade is well worth it. There are TWO Super Early Bird tickets left, make sure to snag one before they are all sold out! Book your tickets for Wednesday 22nd April, Central Manchester at: www.tinyurl.com/pbwten
Above all - please remember to Keep Calm, ALWAYS listen to or read the Supplement, and Carry On. There will be opportunities abound this year and towards 2030 and beyond - the landscape has been set for a surefire bull run. Capital growth looks set to remain slow(ish) at the moment, although if you are in the right part of the UK, you will be well looked after by the combination of that plus inflation, the big bull run needs some runway first (although let’s see what the FCA and PRA do around easing lending requirements again) - but let’s finish our super Golden Quarter together - it is a case of “here we go” in my opinion.