"The constant curse of scale is that it leads to big, dumb bureaucracy - which, of course, reaches its highest and worst form in government where the incentives are really awful." - Charlie Munger
The quote pertains to the likelihood that a new Labour leader will want a larger state, not a smaller one, since it will be “the answer” to all of our problems. But it won’t, of course.
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. If last week was the seismic shock, this week is the slow, agonizing realization of the new transatlantic reality. The past seven days have perfectly demonstrated how US domestic politics and trade weaponization directly dictate the plumbing of the UK economy, and once again, we are entirely on the back foot.
Let’s start with the trade war. Last week, I reported that the US Court of International Trade struck down Trump’s flagship 10% global tariffs, handing a massive lifeline to UK exporters. Well, you can put the champagne back on ice. On Tuesday, the Justice Department officially filed an emergency appeal to the Supreme Court to reinstate the levies, requesting an immediate stay on the lower court's ruling. The uncertainty is completely toxic. If you are manufacturing goods in the Midlands bound for the States, you simply cannot price your forward contracts.
But the more immediate threat is the ticking clock on the Digital Services Tax. We are now exactly halfway through the brutal 14-day ultimatum Trump handed to Keir Starmer: scrap the tax on US tech giants, or face a targeted 25% tariff on a bespoke list of UK exports. Downing Street’s response this week has been the geopolitical equivalent of hiding under the duvet. There is no "trade bazooka," no retaliation, just a paralyzed Treasury terrified of plugging a hole in their tax receipts while simultaneously dreading the export wipeout. Trump smells the weakness, and the Oval Office has spent the week amplifying Nigel Farage’s local election successes to deliberately undermine the Prime Minister's authority.
However, for the macroeconomic observer, the most consequential event of the past seven days wasn’t the trade war; it was the monumental changing of the guard at the Federal Reserve.
Jerome Powell's term is officially over. On Wednesday the 13th, the US Senate confirmed Trump's hand-picked successor, Kevin Warsh, as the new Fed Chair. Trump has finally got his man in the seat. Warsh is a fascinating pivot. He built a reputation as a fierce "inflation hawk" during the 2008 crisis, but in recent months, he has publicly aligned himself with the Oval Office's aggressive demands for lower interest rates.
So, is there a world in which Warsh actually cuts rates now that he is in charge? He will certainly try to wield his influence to make it happen. The problem is, he is walking straight into a macroeconomic brick wall. On the exact same day Warsh was confirmed, the latest US CPI data dropped, and it came in stubbornly hot at 3.8%. Core inflation is refusing to yield, driven by the exact supply chain disruptions and Iranian maritime blockades in the Strait of Hormuz that we’ve been tracking for weeks.
To force a rate cut, Warsh must convince a deeply skeptical 12-member voting board to slash borrowing costs while the Middle East pumps imported energy inflation directly into the US economy. It is an immovable object meeting a highly political force, and it means the "higher for longer" narrative is locked in for a brutal fight.
Why does this matter to the UK property investor? Because we do not exist in a vacuum. When the US Federal Reserve wrestles with rates and inflation stays sticky, the almighty Dollar strengthens, and global bond yields are dragged upwards in its wake.
The Bank of England, already terrified of imported inflation, is watching this transatlantic drama unfold in real time. The UK gilt markets reacted violently to the US data and the Warsh confirmation this week. Yields spiked, and 5-year SONIA swap rates - the absolute bedrock of your fixed-rate mortgage costs - twitched upwards once again.
The takeaway for the capital allocator is brutal but necessary: The US is dictating global monetary policy, and they are exporting their inflationary pain directly into our bond markets. Any lingering 'hopium' that UK mortgage rates are going to meaningfully soften in the next three months needs to be binned. Stress-test your portfolios, prepare for the 25% trade tariffs, and recognise that right now, the Oval Office and its new Fed Chair are pulling more strings than we would like on UK affordability.
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 18 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. This week he was joined by Alice Bullard from Nested on the YouTube show, diving into the numbers for the week ending Sunday 10th May 2026.
Let’s start with the supply side, which remains frankly astonishing, even with the usual Bank Holiday dip. 34,600 new properties came to the market in Week 18 (down from that monstrous 43,400 last week). The Year-to-Date (YTD) supply pipeline now sits at an enormous 671,000 listings. That is 0.9% ahead of 2025, but a massive 16.1% higher than the pre-COVID 2017 - 2019 norm. My year-plus adage of “10% more stock than a normal market” ready reckoner is still rising, if anything. Homeowners and exiting landlords are exceptionally eager to sell, and being 15% to 16% overstocked is simply the new reality.
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) took a breather, dropping to 22,500 for the week - down from last week’s phenomenal 45-week high of 27,700, but perfectly respectable for a week featuring a Bank Holiday. 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? Remember your Economics GCSEs and A Levels? 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 444,000 gross sales. 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 and whatever Warsh or Powell are saying at the Fed. Net sales are also playing ball, printing at 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 withdrawal rate and the sheer volume of price reductions.
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 highlights this exact toxicity again this week, noting that a staggering 46.1% of homes that left UK estate agents' books in April were withdrawn unsold. Almost half the market is failing. I keep quoting this stat weekly at the moment because I just can’t believe it - one week soon it will go in! 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 Chinese water torture of the dripping tap on the forehead.
The mechanism resolving this friction, as always, is price reductions. There were 22,500 price reductions in Week 18 alone. 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 sat at 4,946 this week, and the fall-through rate actually ticked up to 22.0% (up from last week's 21.4%). Still, a mammoth 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 on the back of sticky US inflation and rising gilt yields. 22% is still a “good” result compared to the average, but we do tend to get fewer fallthroughs earlier in the year.
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, the massive listing-to-sale price gap we’ve discussed in recent weeks 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. If you are selling - go on at the right price and don’t waste those first 2-4 weeks - they are critical.
One piece of bonus content from Chris this week is a look at the house price data measured in pounds per square foot (£/sq.ft). April 2026 agreed sales averaged £345.18 per sq.ft. That is 1.8% higher than 12 months ago and 11.3% higher than five years ago. Why does this matter? Because the £/sq.ft at sale agreed historically matches the HM Land Registry Index with 98% accuracy, a full 5 months in advance. It's the absolute canary in the coal mine for where the official indices are heading.
Stock levels sat at 731,000 homes on the market on the 1st of May '26. It is - and this phenomenon is just repeating itself month-to-month 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. As I’ve said - demand is fine, but supply is far too enthusiastic for pricing to rise much.
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 from the unexpected mortgage rate hikes 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. We have to watch the macro figures to get a sense of “the market” but if you are a “local buyer” as many investors are, then you need to understand the temperature in your local market. An example of that follows (preserved from last week).
I was speaking at a meeting recently 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. The Midlands is warm enough - the only context I didn’t have (needy geek, I am) is what that pricing gap looks like historically in that area - context is everything….
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!
Once more I’m your Macro, Macro Man (you have to sing it, but don’t wake the kids). Growth - again, we had some. Was it “proper” growth? I’ll get into all that. We have to talk about the RICS residential market report too - where they try to see the future (with not much success, usually, to be honest). We should make room for the BRC Retail Sales Monitor because that speaks for Consumption in general which is a huge driver of Growth in our economy - and because the figure was well adrift from consensus (although it caught up with what the forecasters have been saying for some months - they just didn’t say it this month - such is the nature of a forecast). Then - you know it - the gilts and swaps, as we had another reversal.
Let’s kick off the Macro section, then, with the big picture: the overall health of UK PLC. The ONS has just dropped its first quarterly estimate for GDP for Q1 2026, and if you just read the mainstream headlines, you might think we are suddenly out of the woods. But as always, we need to look at the details.
First up, the headline numbers. The ONS reports that UK real gross domestic product (GDP) increased by 0.6% in Quarter 1 (Jan to Mar) 2026. This follows a rather anaemic, but revised growth of 0.2% in Quarter 4 of 2025. On an annual basis, GDP is estimated to have increased by an unrevised 1.4% in 2025, while 2024's growth was quietly revised down to just 1.0%.
What is actually driving this mild uptick? In output terms, all three sectors contributed, but the services sector is doing all the heavy lifting, growing by 0.8% in the quarter. The construction sector managed a 0.4% increase in Q1 2026, but let's not get the bunting out - it remains 1.3% lower compared with the exact same quarter a year ago. In fact, private new housing was the largest negative contributor to new work, falling by a chunky 2.6%. We simply aren't building, as I am saying week in, week out.
Once again, as I noted in previous weeks, you have to look at these figures through the lens of inflation and per-capita reality. Nominal GDP actually grew by 1.6% in Q1 2026, leaving it 4.6% higher than a year ago. But the implied GDP deflator - the broadest measure of domestic inflation - increased by 3.5% over the same period. That inflation monster, stoked by structural constraints and global energy prices, is eating the vast majority of those nominal gains.
When you look at Real GDP per head, it increased by 0.6% in Q1 2026, and sits just 0.9% higher than the same quarter last year. We haven’t yet flatlining in real, per-person terms. It’s not a booming economy; it’s a low-growth, supply-constrained grind. It’s better than going negative - but long-time readers and listeners will know that I vastly prefer RHDI - Real Household Disposable Income - because that really looks at the “Pound In Your Pocket” (If this is a good week to quote Harold Wilson…..).
The takeaway for the bloodless capital allocator? The UK economy is currently churning away at a functional volume, but real economic growth is razor-thin, meaning your real yields are doing the heavy lifting right now against persistent 3.5% inflation. If you are acquiring, the lack of new private housing construction fundamentally supports the value of your existing stock. Leverage remains expensive but also depreciates fast, and this sticky inflation world makes the leveraged property investor a nice quid or two simply by keeping up with inflation - it’s significantly more effective now than it would be if we still lived in the 2% world of the old days, which is exactly how you need to look at it. Remember - the leveraged property investor is the second-biggest beneficiary of inflation behind the UK Government….
Let’s move on to the next gauge of the macroeconomic dashboard: the April 2026 RICS Residential Market Survey. If the PMIs told us the UK economy is pulling in completely opposite directions, RICS tells us exactly how the estate agents on the ground are feeling about it. Spoiler alert: they are thoroughly miserable.
First, let's look at the headline sentiment, which is firmly anchored in the negative (anyone who has followed these reports for years will not be surprised. I’d estimate that 90% of them are negative, genuinely, over time - so you get rather “battle-hardened” in a market that still seems to progress on nominal pricing). The RICS survey is valuable because it doesn't just measure closed deals; it measures the mood of the professionals trying to broker them. And right now, the reality of higher mortgage expectations has completely dampened that mood. The net balance for new buyer enquiries came in at -34% for April. Yes, that is a marginal improvement from the -40% bloodbath we saw last month, but it still points to incredibly weak market momentum. Almost every single region across the UK is reporting a noticeable softening in demand. Buyers are simply pulling the plug or sitting on their hands as they watch the bond markets dictate the cost of their future debt.
When buyers hesitate, the pipeline chokes. The agreed sales indicator posted a net balance of -36%, slipping further from -35% previously. The forward-looking metrics are just as grim, with near-term sales expectations sitting at -32%. The agents on the ground are essentially pricing in a thoroughly subdued summer, fully acknowledging that the current macroeconomic gridlock and geopolitical fallout are going to persist for the months ahead. We still aren’t seeing ANY of this in the Watkin figures week-to-week, and I do worry about Southern Bias in the RICS report - but it says what it says.
We need to apply a crucial layer of Propenomix reality to the RICS gloom. These agents are reporting a firmly downward trend in agreed sales, and it is dangerously easy to read that and assume the market has entirely ground to a halt. It hasn't. We know from the actual plumbing of the market that we are still churning through roughly 104,000 transactions a month. Transaction volumes are performing significantly better than the deeply depressed days of 2023 and 2024.
What the RICS survey is capturing here isn't a lack of transactions; it is the friction. The market is functional, but it is incredibly hard work. Agents are having to battle through that intergalactic 27.4% listing-to-sale price gap, constant down-valuations, and twitchy lenders just to drag a single deal over the line. They are exhausted, and their sentiment reflects that. Who likes working hard? They prefer it when times are easier, just like any rational economic actor!
On the pricing front, RICS confirms exactly what we saw in the Halifax data: headline house prices continue to see moderate downward pressure. When you combine nominal downward pressure in the South with sticky 3.5% inflation, the real-terms value of UK bricks and mortar is actively shrinking.
The takeaway for the capital allocator? Do not confuse terrible market sentiment with a total lack of market liquidity. The estate agents are complaining because the easy money has vanished, the corporate "hopium" valuations aren't sticking, and they are actually having to work for their fees. But properties are still transacting. Let the market weep over its -36% sales expectations, and use that widespread pessimism to your absolute advantage. When the sentiment is this poor, power remains entirely with the buyer who has the facility to actually perform. Agents want investor buyers MORE at times like this - because they feel they need them. If I translate this to my day-to-day activities - my phone is ringing because traders and agents are reaching out to me, which means their other - easier - buyers are in hiding or have pressed the pause button.
Dare I say it for the 863rd time since writing the Supplement - Be Greedy ONLY When Others Are Fearful - the great Warren Buffett, of course.
Let’s move on to the third piece of the macro puzzle: the UK consumer. If the GDP print tells us we are flatlining in real terms, the British Retail Consortium (BRC) Retail Sales Monitor for April 2026 tells us exactly how that flatline feels on the high street. Spoiler alert: the consumer is terrified, and the wallets are slamming shut.
First, let's look at the headline bloodbath. UK retail sales decreased by a chunky 3.4% year-on-year on a like-for-like basis in April. To put that into context, the market was expecting a 0.8% increase. It completely reverses the 3.1% growth we saw in March and marks the very first contraction in retail activity we’ve seen since November 2024. Total retail sales dropped by 3.0%, with non-food sales falling 3.3%.
Now, the mainstream press and the retail apologists will immediately point to the calendar. They will argue that April’s fall was largely driven by the Easter shift - because Easter fell in late April last year, the year-on-year food sales comparisons are heavily distorted.
And yes, the Easter timing effect is real. But if you look under the hood, this is not just about a lack of chocolate eggs. The broader plumbing confirms a systemic pullback. Barclays credit and debit card data also dropped this week, showing overall spending fell 0.1% annually - the first outright decline in five months.
The real story here is consumer confidence, and right now, it is in the toilet.
Households are watching the geopolitical chaos in the Middle East, they are seeing the energy and fuel supply chain warnings we discussed earlier, and they are reacting exactly as you would expect: they are reining it in. The fear of imported inflation and higher living costs has prompted a sudden, sharp pivot. The UK consumer is prioritizing defensive saving over discretionary spending.
You can see this fear perfectly reflected in the category data. The pullback in discretionary spend is brutal. Travel spending has plunged by an eye-watering 5.7% as the uncertainty around summer holidays bites hard. The recent, fragile recovery in furniture sales has completely lost steam. Hotels and other big-ticket purchases are all flashing red.
The only glimmer of hope the BRC could muster? Early signs show demand for TVs and sound systems is picking up ahead of the upcoming World Cup. Bread and circuses, folks. If the consumer can't afford a holiday or a new sofa, they will apparently settle for watching the football in high definition. Incidentally, the data showed online sales holding up slightly better than physical stores, pushing online penetration to its highest level so far this year.
The takeaway for the property investor? We track retail sales because it is the ultimate leading indicator of your tenant's disposable income. If the UK consumer is so squeezed by the cost-of-living and so terrified of the macroeconomic backdrop that they are abandoning summer holidays and furniture purchases, they have absolutely zero capacity to absorb aggressive rent hikes.
We are rapidly approaching an affordability ceiling in the Private Rented Sector (PRS). Yes, supply is incredibly constrained, which theoretically supports rents, but you cannot extract blood from a stone. Willingness to pay and ability to pay are two completely different things. If you are banking on double-digit rental inflation to bail out a highly leveraged, low-yielding acquisition in 2026, you are playing a very dangerous game. The consumer is telling us exactly where their limits are. Listen to them.
OK. Time to get Gilty, or not Gilty. Back to business as usual (a 5-day week, for a fortnight anyway!) and let’s point the fingers squarely at the Government for the events of the past week in the Bond Markets. Those “pesky investors” - or whatever Mr Burnham called them, that’s led the markets to have an irrational reaction to his potential appointment, in my view - decided that the price of poker needs to go up, up and away until this is all settled.
We have a time horizon on that - it’s long. Longer than we would like. Long if you sweat the markets every day anyway (don’t, it isn’t good for your mental health other than anything else. Don’t worry about what you can’t control - one of the finest pieces of advice I’ve ever had and I absolutely live my life by that). It’s actually a short period of time - but it will feel long, because you will soon be sick of the speculation over which underachiever will be the next one to lead the country. (I actually think Burnham is probably OK, but it’s not a penalty kick and I’ll talk about that later). We’ve got a quarter of volatility and freeze in the economy once more, guaranteed.
What happened this week then, in the numbers? The 5y gilt yield gapped up to open at 4.526% and that was a correct gamble as it closed at 4.705%, a slippage of 18 basis points. Yuck. The 4.98% “recent” high in June 2023 could be tested here, although I don’t think it will be - but it is fragile. The 5y swap yield touched 4.4% on the Friday close - horrific - and so our best guess for 5 year fixed mortgage money in 6 months time becomes 6.4%, 6.25% if we are lucky. Anything less than 6.25% in your deal stacker spreadsheets today is kidding yourselves, folks, unless you like to write off big chunks of your capital growth with 5% arrangement fees - but that’s robbing Peter to pay Paul, especially if you are down South at the moment.
Let me just steady the ship though, here. I still believe the next 5 years brings capital growth in the 25% region, nominally. What will inflation take out of that? At this point in time - plenty - but when the Middle East situation simmers down to an overall compote, given that nothing permanent will get sorted out on the back of all of this - there will be the “way down” disinflation/deflation of the oil price normalising again, and we shouldn’t forget that. That 25% just looks a bit back-end loaded but there’s still the reality that inflation will push up prices more, not less, than it otherwise would have done…..and the change in capital requirements for UK banks which will encourage and allow them to lend more money, not less. Tier 1 capital requirements were quietly softened from 14% to 13% in late 2025 to try and support growth - an area in which I actually support tinkering, because you don’t want to change anything dramatic. Still - what’s 1%? Well, it isn’t 1%. I will spare you the complexity of risk-weighted assets - but I can tell you that that shift might make £1.4bn in tier 1 capital move from £28.6bn of mortgage lending to £30.8bn - or, in plain English, with the SAME capital, banks can lend an extra 7.7% of mortgage debt. Not insignificant, I’m sure you agree - and of course shareholders of banks want them to lend as much as possible…..
I’ve got to close this section by saying the 5.854% close on the 30-year gilts represents some brilliant value, although it is a risky play because this could get higher before it moderates. But once whichever new stooge is in place, you won’t see bond yields like this for a while (until the speculation starts over the 2029 election, possibly). £1m of pension funds though buying those bonds guarantees an income of £58.5k a year for 30 years (no inflation protection!) - and it doesn’t QUITE work like that because the coupon won’t be 5.854% - it will be whatever the coupon says on the bond - but still, that sounds like an awfully good deal to me for anyone retiring right now with 7 figures in their pension pot. Don’t bother playing the other games - just play that one (remember, the £1m gets preserved, not lost). Probably also a great time to buy an annuity, as it goes, on that subject!!!
OK - Deep Dive - we’ve got to get into the Labour Party leadership contest. Sorry not sorry. It has to be done. I’m more interested in who the Chancellor is going to be rather than who the next PM will be - but that’s a much broader and harder speculation at this point. So let’s focus on the main runners and riders and what they might mean for bond yields and property investment.
Then we will get into the King’s Speech - we’ve got to - then unaffordable rents according to the IPPF, and then the Joseph Rowntree Foundation report on Tax Reform and Rent Controls. Listen. Some of these papers have been prepared for months or a year. They see this as “the chance” to influence the runners and riders we are about to discuss. But I’m a big believer - know your enemy. Rent controls (in the form they would be introduced, IF they come) - rent stabilisation, which I first mentioned a couple of years back - wouldn’t be so bad as long as you aren’t sitting with tenants with ultra-below-market rents. If you are - change that TODAY, and get the rent increases out. You could be left with assets that are deeply undervalued if you don’t. Eat the frog. I don’t think I need to say that to many Supplement readers, as I’ve always preached that methodology, but just in case I do…..
OK - the next Labour leader. Here we go.
The Deep Dive: The Succession Plan and the Property Plumbing
Let’s get into the Deep Dive. As we covered earlier, Thursday’s local elections were an absolute bloodbath for Keir Starmer. Losing over half your council seats to a pincer movement of Reform on the right and the Greens on the left less than two years after a landslide is fatal territory. The political sharks are circling in Westminster, and the knives are officially being sharpened.
As ruthless capital allocators, we don’t do tribal politics. We do risk analysis. If Starmer is forced onto the backbenches to spend more time with his Arsenal season ticket, who takes the wheel of the Labour Party? More importantly, what does their specific brand of ideology do to Private Rented Sector (PRS) policy, the bond markets, and the 5-year SONIA swap rates that dictate your mortgage costs?
Let’s break down the four most likely contenders to wear the crown, and exactly how you need to defensively position your portfolio for each.
1. Angela Rayner: The Regulatory Nightmare
If the Labour left and the unions decide they want one of their own to violently pivot the party back to its socialist roots, Rayner is the undisputed frontrunner.
The Policy Reality: Rayner is the architect of the most draconian elements of the housing briefs we’ve seen over the last few years. If she takes the top job, expect the private landlord to be designated as Public Enemy Number One. Section 21 would be abolished overnight with zero caveats for court backlogs. Rent controls - which she has repeatedly flirted with in speeches to the union base - would likely be implemented via a hard cap linked to CPI or lower. The "Right to Buy" would be scrapped entirely, and massive wealth taxes on property would be tabled to fund social housing.
The Bond Market Reaction: Absolute panic. The "gilt vigilantes" look at Rayner and see an unfunded, high-tax, anti-capitalist agenda. International capital would flee. Gilt yields would spike violently, dragging swap rates up with them. Expect a 6%+ mortgage market to persist as the Bank of England is forced to defend a cratering pound. Budget for 7% mortgages (for a bit, or perhaps an extended bit).
The Investor Play: Liquidate low-yielding Southern stock immediately. Pivot exclusively to state-backed leasing (Local Authority, Serco) where the government underwrites your rent and void risks. The market hasn’t been knocked particularly by Iran, it likely won’t be bothered by this leadership contest either (yet).
2. Andy Burnham: The Bureaucratic Devolution
"The King in the North" has been waiting for this exact moment. Untainted by the Westminster fallout, Burnham offers a populist, regional appeal that Labour desperately needs to win back the "Red Wall" from Nigel Farage.
The Policy Reality: We don't have to guess what Burnham will do; we just have to look at his track record as Mayor of Greater Manchester. His approach isn't outright Marxism; it is suffocating bureaucracy. He is the champion of the "Good Landlord Charter" and aggressive, universal landlord licensing. Under Burnham, expect national mandatory licensing schemes, steep annual fees per property, and local authorities being granted sweeping powers to enact regional rent caps and compulsory purchase orders on "substandard" stock. He favours large-scale Build-to-Rent institutional capital over the SME landlord.
The Bond Market Reaction: A moderate wobble. The City doesn't fear Burnham the way they fear Rayner, but they view him as a high-spend regionalist. He will want to borrow heavily to fund Northern infrastructure and transport. Yields will edge upwards on the back of increased gilt issuance, keeping mortgage rates stubbornly high, but likely avoiding a Truss-style meltdown.
The Investor Play: Admin-heavy but workable. Yields in the North will remain strong, but your operating expenses (licensing, compliance, mandatory property upgrades) will compress your net margins. Scale becomes the only way to survive the paperwork.
3. Ed Miliband: The Green Premium Penalty
Could we see the return of the 2015 runner-up? If the Labour party panics over the surging Green vote (represented by Zack Polanski and co.), they may turn to their resident Net Zero zealot to win back the eco-left.
The Policy Reality: If Miliband takes charge, the PRS becomes the frontline of the climate war. All those EPC regulations that were watered down or delayed? They are coming back with a vengeance. Expect a hard mandate for EPC 'C' (or even 'B') by 2029, enforced by massive fines or an outright ban on letting the property. Furthermore, expect a "Green Wealth Tax" targeted at multiple property owners to fund his multi-billion-pound national grid and renewable energy pledges. Impossible to deliver of course, but he will want whoever he puts in as Energy Minister to “have a go”.
The Bond Market Reaction: Highly toxic. Miliband's entire "Green Prosperity Plan" relies on the state borrowing hundreds of billions of pounds to fund green infrastructure. The bond market hates unfunded ideological spending. The Treasury would have to flood the market with gilts, causing yields to surge.
The Investor Play: The "Green Premium" illusion we discussed earlier becomes a hard, legal reality. Un-retrofitted Victorian terraces become stranded assets overnight. The only viable play is buying new-builds off-plan or deep-discounted, low-EPC stock from distressed sellers to retrofit and flip to institutional ESG funds.
4. Wes Streeting: The Centrist Pipe-Dream
Streeting is the darling of the Blairite wing. He is sharp, media-savvy, and understands that private capital is required to fix broken public services.
The Policy Reality: Streeting would be the most pragmatic leader for the property sector. He understands basic supply and demand. He would likely water down the most toxic elements of the Renters' Rights Act to prevent a mass exodus of landlords, push aggressive YIMBY planning reforms to get Britain building, and invite private capital to partner with the state.
The Bond Market Reaction: A massive relief rally. The City would pop champagne corks. Streeting is viewed as a "safe pair of hands" for capital. Gilt yields would drop sharply, swap rates would soften, and mortgage pricing would become highly competitive again as international money flows back into UK assets.
The Catch: He won’t win. Let's be brutally realistic. The Parliamentary Labour Party (PLP) and the union backers will never allow it. Following a local election where they bled working-class votes to the populist fringes, the Labour membership views Streeting's centrist, pro-business views with absolute disdain. To them, he is simply a Tory in a red tie. He is the leader the economy needs, but the one the current Labour Party is structurally incapable of electing. Can he pivot to Chancellor by getting behind Burnham when he inevitably does get eliminated? Possibly……
The Ultimate Takeaway:
If (when) Starmer falls, the route to power in the Labour Party runs straight through the left wing and the unions. That means whoever takes over will bring a high-tax, high-borrowing, heavily regulated agenda. The gilt vigilantes are watching, and the cost of your debt will be the collateral damage. Keep your LTVs low, fix your rates carefully, and remember: in the 2026 political landscape, capital must be completely ruthless to survive. Personally, I feel a bit sick, but am praying for Burnham (I think the Makerfield by-election is a penalty kick by the way, Burnham is the only relevant political figure at this time who polls better than Nigel Farage in popularity polls). KingMakerfield, they will rename it after this historic by-election.
Next up - the King’s Speech:
Theme 1: Housing, Leasehold Reform, and Cladding
The Summary: The Government has outlined plans to directly address housing insecurity and property safety through a raft of new legislation. Ministers will introduce the Social Housing Renewal Bill, which aims to increase long-term investment in the social housing sector. Alongside this, the Commonhold and Leasehold Reform Bill will be brought forward to overhaul the existing leasehold system, specifically targeting the capping of ground rents. Furthermore, addressing building safety remains a legislative priority, with the introduction of the Remediation Bill. This proposed legislation is designed to accelerate the remediation process for individuals currently living in properties affected by unsafe cladding. These measures collectively represent a significant push to reform the foundational mechanics of property ownership across the United Kingdom.
The Propenomix Perspective: So, the state is stepping in again to fix housing - colour me sceptical. The promise of long-term investment in social housing sounds wonderful on paper, but where is the capital actually coming from? If the government plans to borrow heavily to fund this Social Housing Renewal Bill, we need to keep a very close eye on gilt yields. Any sudden spikes there will bleed directly into SONIA swap rates, which means higher mortgage costs for the rest of us. As for capping ground rents via the Commonhold and Leasehold Reform Bill, it is classic populist vote-winning. Yes, the leasehold system is archaic, but stripping away freehold value overnight without compensation mechanisms usually terrifies institutional investors. Capital tends to flee when the rules of the game change retroactively. The push to speed up cladding remediation is well overdue, but the real-world supply constraints on qualified contractors mean legislative deadlines might clash violently with operational reality.
Theme 2: Infrastructure, Transport, and Regional Powerhouses
The Summary: The King's Speech highlights that the economic security of the United Kingdom relies heavily on the development of world-class infrastructure. To facilitate this, the government is introducing several targeted bills. The Civil Aviation Bill will be brought forward to unlock the economic benefits associated with airport expansion. On the roads, the Highways (Financing) Bill aims to enable rapid construction of projects, explicitly mentioning the Lower Thames Crossing. Additionally, the Northern Powerhouse Rail Bill is designed to deliver a fair deal for the North of England by improving regional rail connectivity. The broader strategy involves using public investment to actively shape markets and subsequently attract further private investment into these large-scale infrastructure projects.
The Propenomix Perspective: We have heard the song of world-class infrastructure unlocking regional growth for decades, yet the execution usually leaves much to be desired. The Northern Powerhouse Rail Bill is a fantastic headline, but property investors in the North should wait to see actual spades in the ground before pricing in these transport premiums. Promising rapid road building - like the Lower Thames Crossing - under a new financing bill suggests the state wants to leverage private money. However, if inflation remains sticky and the cost of capital stays elevated, attracting that private investment will be an uphill battle. You cannot simply command private equity to build roads if the internal rate of return does not stack up against a risk-free rate of four point five per cent. For property economics, infrastructure is everything, but until we see the detailed funding models, I am treating these announcements as aspirational rather than guaranteed market movers.
Theme 3: Economic Growth, Trade, and Business Regulation
The Summary: A central pillar of the legislative agenda focuses on economic growth and reforming business environments. The government asserts that improved trading relations are crucial for significantly raising economic growth and lowering prices for the working population. To this end, the European Partnership Bill will be introduced to strengthen ties and take advantage of new trading opportunities with the European Union. Domestically, the administration aims to support British businesses by tackling operational hurdles. This includes the Small Business Protections (Late Payments) Bill, which is designed to address the issue of late payments that stifle enterprise. Furthermore, the Regulating for Growth Bill will be introduced to reduce the burden of unnecessary regulation through innovation, aiming to create a more dynamic environment for private enterprise.
The Propenomix Perspective: The rhetoric here is a fascinating tightrope walk. On one hand, we have the European Partnership Bill attempting to quietly smooth over trade friction - a net positive for supply chains and potentially easing some of the materials inflation we have seen in construction. On the other hand, the Regulating for Growth Bill promises to slash red tape. I will believe it when I see it. Historically, governments are excellent at creating new regulations and terrible at deleting old ones. The move to tackle late payments is actually quite significant for the SME construction sector. Cash flow is the absolute lifeblood of the smaller developers and trades who build the majority of our housing stock. If this bill genuinely forces larger players to settle invoices on time, we might see fewer insolvencies in the sector. However, the macro picture remains the same - all the regulatory tinkering in the world will not offset a fundamentally hostile interest rate environment.
Theme 4: Energy Security, Utilities, and State Intervention
The Summary: The Government has outlined a robust approach to managing critical utilities and national security through increased state involvement. Ministers believe that energy independence must be a long-term goal of national security, requiring significant investment and reform. Consequently, the Energy Independence Bill will be introduced to scale up homegrown renewable energy , alongside the Nuclear Regulation Bill to encourage a new era of British nuclear energy generation. Beyond energy, the state is taking an active role in other critical infrastructure areas. Legislation will be introduced to clean up the water industry via the Clean Water Bill. The government will also establish Great British Railways through the Railways and Passenger Benefits Bill , and take necessary action to safeguard domestic steel production with the Steel Industry (Nationalisation) Bill.
The Propenomix Perspective: Make no mistake - the era of the active, interventionist state is well and truly back. The sheer volume of centralisation here is staggering. We have the Clean Water Bill to strong-arm the utilities, the nationalisation of rail, and even the nationalisation of the steel industry. For anyone investing in UK PLC, this is a massive shift in the tectonic plates. When the government decides to deploy the power of an active state to shape markets, private capital usually gets nervous. What does a nationalised steel industry mean for the cost of structural steel in commercial property development? Usually, state monopolies are not famous for their pricing efficiency. The push for homegrown nuclear and renewable energy is completely logical from a macro-security standpoint, but these are capital-intensive, multi-decade projects. Expect the Government to issue a mountain of debt to finance this push - which brings us right back to my favourite topic: inflation, gilts, and the inevitable pressure on your mortgage rates.
Now - the affordability crisis in the PRS, according to the IPPF:
Theme 1: The Scope of the Affordability Crisis
The Summary: In the UK, 2.4 million households in the private rented sector face unaffordable rents, representing 45 per cent of all privately renting households and an increase of 250,000 since 2023. The report defines housing as affordable if a household spends less than 30 per cent of its post-tax income on housing costs. Projections indicate that without intervention, the number of households with high housing costs will reach nearly 2.5 million by the end of the decade. Significantly, three-quarters of working-age renters with high housing costs reside in households where at least one adult is employed, demonstrating that the crisis extends well beyond those reliant on state benefits. The report attributes these rising costs to recent global economic instability, inflationary shocks, and a fundamental imbalance of market power between landlords and tenants.
The Propenomix Perspective: I am inherently sceptical of any narrative that paints the private rented sector as a homogenous bloc of profiteering villains, but the underlying data here is hard to argue with. The affordability crisis is very real, but we must be crystal clear on the root cause. This is not a failure of landlord morality; it is a systemic failure of supply meeting demand, compounded by catastrophic macroeconomic management over the past half-decade. When SONIA swap rates spike and 10-year gilt yields react to disastrous fiscal events, the cost of capital surges. Landlords with leverage are simply behaving rationally, passing on their increased debt servicing costs to maintain any semblance of yield. If they do not, they go bust or sell up - neither of which helps the tenant. Blaming the provider of a scarce asset for market pricing is intellectually lazy. We have built too few homes for forty years, and now we are surprised that the poorest are being squeezed.
Theme 2: The 'Double-Locked' Rent Control Proposal
The Summary: The Institute for Public Policy Research recommends a national policy of 'double-locked' rent stabilisation. Under this proposal, rent increases would be capped at the lower of the Consumer Prices Index or wage growth, calculated as a rolling average over the previous twelve months to smooth out spikes. Crucially, this limit would apply both within existing tenancies and between new ones. The policy aims to protect tenants from sudden affordability shocks while allowing landlords to maintain real-terms income when wages keep pace with inflation. The report models that if such a policy had been enacted in 2019/20, average rents would be around 7 per cent lower by 2030, saving English renters roughly £850 annually.
The Propenomix Perspective: Here is where the think-tank ideology clashes spectacularly with market reality. Tying yields to the lower of CPI or wage growth is a fundamentally asymmetrical risk proposition for any property investor. It ensures that capital returns are structurally capped on the upside but remain fully exposed to downside inflationary shocks when operating costs - maintenance, insurance, compliance - invariably rise faster than headline CPI. Applying this between tenancies is the real kicker. The report casually assumes landlords will just absorb the margin compression, but capital is highly mobile. If the yield on a buy-to-let in Solihull is artificially suppressed below the risk-free rate of a government bond, why would any rational actor deploy capital into housing? We do not need price ceilings; we need a functioning market. This 'double-lock' is a politically palatable way to slowly choke off private investment in the very sector that desperately needs it.
Theme 3: The Threat of a Landlord Exodus
The Summary: The report challenges the prevalent industry warning that rent controls will trigger a mass exodus of landlords. It argues that evidence from the Scottish rental market shows rent controls lead to sector consolidation, with smaller landlords selling portfolios to larger, professional operators, rather than homes disappearing from the market entirely. In England, 45 per cent of landlords currently own just one property, representing only 21 per cent of all tenancies. To mitigate the risk of landlords converting long-term rentals into more profitable short-term holiday lets, the report strongly recommends implementing an annual cap on the number of nights a property can be let short-term, alongside a strict licensing framework. It also proposes a ten-year exemption from rent controls for new-build properties to preserve developer incentives.
The Propenomix Perspective: The report is half-right here - we are already seeing massive sector consolidation. The amateur landlord, squeezed by previous tax changes, higher mortgage rates, and looming energy efficiency upgrades, is indeed heading for the exit. But the assumption that professional, corporate landlords will seamlessly buy up this secondary stock is highly questionable. Institutional capital wants purpose-built, highly efficient, scalable assets - not a damp Victorian terrace requiring endless capital expenditure. Furthermore, the proposed ten-year exemption for new builds is a tacit admission from the authors that rent controls destroy the incentive to create new supply. As for short-term let caps, it is a classic game of regulatory whack-a-mole. If you make long-term letting structurally unprofitable, capital will inevitably find a loophole or exit the asset class entirely.
Theme 4: Looking to European Models
The Summary: International precedents are highlighted to demonstrate that well-designed rent controls can be effective without devastating the housing supply. In Spain, the government introduced a temporary 2 per cent cap on rent increases in 2022, followed by a permanent index (the IRAV) that smoothed inflation metrics. Consequently, official data shows Spanish rents rose by just 2.6 per cent in 2023, compared to 9 per cent in the UK. In Germany, the report notes that disruptions in Berlin's housing market were primarily caused by the legal uncertainty surrounding their temporary rent freeze, coupled with broader macroeconomic factors like rising interest rates following the invasion of Ukraine, rather than the rent controls themselves.
The Propenomix Perspective: Ah, the classic European comparison. I am always fascinated when analysts point to the continent as the holy grail of rental policy. Yes, Spain kept rent inflation at 2.6 per cent, but we cannot simply copy-paste a regulatory framework onto the UK and expect the same outcome without acknowledging our unique structural deficits. The UK planning system is arguably the most restrictive and dysfunctional in the developed world, acting as a massive barrier to the counter-cyclical state building that Germany utilises. Furthermore, using Berlin's catastrophic 'Mietendeckel' as proof that only "bad design" causes supply shocks is an incredible piece of mental gymnastics. Prices carry vital economic information. When you mute that signal through state intervention, the market clears via queues, reduced mobility, and a thriving black market for furnishings and key money. Intervention does not cure a structural deficit; it merely hides the symptoms.
And now - more petrol on the fire, and you know how expensive petrol is at the moment….sorry…..the JRF present their thoughts on rent controls and tax policy:
Theme 1: The Justification for Rent Controls - Landlord "Supernormal" Returns
The Summary: The Joseph Rowntree Foundation asserts that private landlords consistently make supernormal rates of return on their investments. According to their commissioned analysis, landlords achieved average pre-tax returns of 8.5% in 2018, 9.2% in 2021, and 6.9% in 2024. These figures comfortably exceed the 4.75% to 4.95% benchmark return rate for the broader real estate sector during the same period. Because of these robust margins, the report argues that rent controls are economically viable and could be implemented without causing a mass exodus. The primary model proposed would cap rent increases at the Consumer Price Index (CPI) within tenancies, and CPI plus 2% between tenancies. The report claims this intervention would leave renting households an average of almost £1,200 per year better off by 2030/31.
The Propenomix Perspective: This concept of "supernormal returns" is a fascinating piece of academic gymnastics. It is remarkably easy to find market-beating yields when you are looking in the rear-view mirror of a decade defined by near-zero interest rates. Comparing the highly leveraged portfolios of individual property investors to the unleveraged, institutional commercial real estate sector is a classic case of comparing apples to oranges. Let us be absolutely clear here - introducing rent controls based on historic, pre-tax equity returns is a remarkably dangerous game. The market is shifting - and quickly. If you cap gross yields while landlords are refinancing onto current SONIA swap rates, you will not just squeeze margins, you will obliterate them. The assumption that landlords will simply absorb these caps without exiting the market is delightfully naive.
Theme 2: Capital Gains Eclipsing Rental Yields
The Summary: The report highlights that capital gains are the dominant driver of total return on equity for landlords across most regions. Where average returns shifted significantly between 2018 and 2024, house price growth was the primary factor, rather than changes in rental income. Despite the recent spike in borrowing costs, the vast majority of landlords remain profitable on a day-to-day basis, with 95% making a profit on rental income alone in 2024. Furthermore, when combining capital gains and rental income, 98.8% of landlords achieved an overall positive return on their investment in 2024.
The Propenomix Perspective: The think-tank obsession with capital gains is exactly where these policy proposals detach from reality. Paper wealth does not pay the mortgage, it does not settle the tax bill, and it certainly does not pay the local tradesman when the boiler gives up the ghost on a Sunday morning. Relying on house price inflation to subsidise poor cash flow is exactly the kind of amateur hour strategy that created the fragile, highly leveraged portfolios we are currently seeing unwind. Yes, historically, capital growth has bailed out bad yield plays. But looking forward, with affordability stretched to breaking point and gilt yields where they are, betting the farm on uninterrupted capital appreciation is reckless. You cannot regulate a cash-flow market based on the assumption that house prices will always rise.
Theme 3: The Tax Reform Trade-Off
The Summary: Recognising that rent controls could trigger a rapid sell-off of rental properties, the report proposes a significant restructuring of landlord taxation. The authors suggest reversing the Section 24 restrictions to reinstate full mortgage interest tax relief. To offset this and capture more revenue, they recommend applying both employer and employee National Insurance Contributions to all taxable rental income. This structural shift aims to shield highly leveraged landlords from interest rate shocks, reducing the proportion of mortgaged landlords operating at a loss from 11.2% to 7.6%. Consequently, the tax burden would be redistributed towards unencumbered landlords who currently enjoy higher profit margins.
The Propenomix Perspective: I have to confess, seeing a major policy report suggest reversing Section 24 is a welcome dose of common sense. We have been saying for years that taxing turnover rather than profit is a surefire way to break the private rented sector. But do not start cheering just yet. Swapping the Section 24 tax grab for a National Insurance raid is hardly a victory for the rational investor. Treating capital investment as if it were a salaried job fundamentally misunderstands risk. If I am deploying capital, absorbing void periods, and managing regulatory compliance, I expect an investment return - not to be taxed as an employee of my own bricks and mortar. It is a classic sleight of hand - offering relief with one hand while pickpocketing you with the other.
Theme 4: The Limitations of Supply and Welfare
The Summary: The analysis argues that supply-side solutions will fail to address immediate affordability pressures, noting that private renters currently spend 34% of their household incomes on rent. Even if the government meets its ambitious target of 1.5 million new homes over the current parliament, forecasts suggest rents will continue to absorb average wage growth until the end of the decade. Additionally, the benefit system is deemed inadequate, as approximately one million households receiving support live in properties where rents are higher than the 30th percentile Local Housing Allowance rates. Therefore, the foundation concludes that rent caps are necessary for near-term relief.
The Propenomix Perspective: The reality check on housing supply in this report is absolutely spot on. We are not going to build our way out of this structural deficit this side of 2030. The planning system is still wading through treacle, development finance remains painfully expensive, and the labour market constraints are very real. But jumping from "building takes too long" to "let us implement rent controls" is a spectacular logical leap. Price controls do not create supply - they destroy it. If the state wants to subsidise living costs, it needs to step up and fix the Local Housing Allowance properly, rather than trying to outsource the welfare state to private individuals. The fundamentals remain unchanged - restrict the supply of capital into the sector, and you will only guarantee higher rents in the long run.
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!