"Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't... pays it." - Albert Einstein
This week’s quote pertains to the deep dive, as ever, as I get stuck into a number of reports including one on social mobility from the Institute for Fiscal Studies - it’s a seriously heavyweight paper but not without its flaws.
As the calendar creeps towards a new year, it’s a natural time to pause and tackle the biggest challenges that keep SME property businesses from achieving true, sustainable growth. For most, this boils down to two core areas: Laying a bulletproof strategic plan for the next 12 months, and finally cracking the code on financial measurement and accountability. If you’ve ever felt lost in a sea of bookkeeping data, or if your productivity methods are falling short, it’s time to switch from doing to leading - and truly understand how your assets are performing. Book in on the next Property Business Workshop with myself and Rod Turner - Thursday 22nd January - Central London - https://tinyurl.com/pbwnine
Another plea for ongoing feedback please - I had some superb feedback on the Supplement a week ago when someone who has been a long time reader informed me that she was finding things much easier to process since I’d started the iterative process of using AI to help me with clarity and structure, and brevity. Thank goodness, keep it coming please!
Trumponomics of course. We had a huge dose last week as Mr Trump unveiled the majority of his new year’s resolutions. A lot is about staying in power - of course - because he won’t want to be fighting either of the houses after the midterms and be constantly blocked by congress. It does rather “nerf” a president and it does tend to happen with some consistency when a president’s party has controlled the oval office and both the houses in the first half of a term.
There’s a blend of “probably quite effective actually” policies and “soundbyte” policies going on. But then, for anyone who is capable of being objective, policy has never been the hill that Trump’s critics want to die on. You very rarely hear a coherent breakdown of his policy stance as a whole with a critique. We could discuss his foreign policy which “isn’t to everyone’s tastes” (I would say that’s an understatement) but I am coming around more to the characterization of his diplomacy as a “face up poker” way of playing foreign policy - these moves have gone on under the table since the days of the empire, frankly, but this is the brash, front foot American way of doing them rather than the British “let’s have a cup of tea and I might stab you in the back” or the Chinese “let me in and I have no compunction about stealing your intellectual property, and more if you let me”.
Mr Trump also served us all up a little cocktail, back to his primary negotiating point - and his favourite word, you will remember - with some tariffs for those who do not support his plan to acquire Greenland. There’s a “loyalty tax” being used as an analogy for staying on side - I’m not sure where you’d pitch that on a percentage scale, but at this time it’s making Rachel Reeves envious, I think. Don’t skip that key word - acquire - as I said last week, this is by far the highest probability outcome here. The rest is bluff, but he has to say it in case his “face up” foreign policy even remotely tempts Russia or China to make a move towards Greenland. Think Alaska from the Russians. Business is business. That’s it. The official White House and legislative proposals are preferring the word “acquire”, so let’s stick with it - this is what Press Secretary Leavitt said this week - acquire.
The loyalty tax is leading to a seat on the Gaza Peace Board - apparently - for Keir Starmer. Now - Starmer and Trump do not have the same personality type. Obvious, I’m sure, but worth saying. Machado, the Nobel Prize Winner, The Iron Lady of Venezuela, now in the box seat following Maduro’s removal (she’s a champion of democratic capitalism, so you’d think they are on to a winner there as far as Trump sees it - and the west sees it, really) - made an incredible chess move this week when she gifted Trump her medal - inscribed with gratitude to Him. I can’t think of a person I’ve ever met who would value that sort of gesture more than he would, because of his personality type. A masterclass in “Trump whispering”, some said, and it was exactly what I thought.
I doubt the Nobel committee were delighted, but all in all, it struck me as a stroke of genius. Starmer will be pleased to be relevant - particularly after a lot of commentary that the UK is a lot less relevant than it was, which is true of course as countries and economies bypass us on a regular enough basis as they industrialise and we limp along - but I don’t suppose there’s much ego in here for Sir Keir. Ideology will always divide - I can totally see the logical business case for the renewables critique that Mr Trump likes so much and Reform share in spades - but to be ideologically anti-solar and wind doesn’t sit well with me, I’d have much more sympathy with Musk’s position that “the Sun is the answer” (not the newspaper) and indeed have said the same thing since 2009 when I first discovered the joy of the solar panel. Even in England.
One more policy towards helping homeownership too - back on topic - allowing people to use their 401(k) (pensions) to use as a deposit on property. It struck me as a bit like “help yourself to buy” or similar. Honestly, it sounds quite clever - he really has just told his core team to “help normal Americans buy houses at all costs, I don’t care what corporate interests you take it from”. If you remember back to the pensions reform from the previous administration, there was a day when the value of companies providing annuities simply halved overnight when it wasn’t legislated to buy annuities any more. That added that level of value to everyone with a pension - or more - that’s one way of looking at it. So if your moves hurt a very niche part of a market, you can be deemed to genuinely be transferring value TO the people, I think. How very non-capitalist, in a way, but to an extent - what a refreshing way to approach Government. Actually FOR the people. When you aren’t busy doing it for yourself, of course, which is a critique that will always be fair to level against the Trump Dynasty Evolution (or whatever WWE wrestling name you might prefer to give it).
As usual, I close the Trumpwatch part thinking “whatever next”, and with mixed feelings. But the biggest takeaway - policy-wise, the policy does broadly seem wise, if the analysts can depoliticize or simply remove the way they feel about Mr Trump from their analysis. I’d also like to make a point that I haven’t seen anyone else talking about. The ultimate populist is redefining the term, which has become as equally abusive as the word “woke”. Both are not bad by definition, so one side or the other of the political aisle have just redefined them. However - is there not an argument that when a populist REALLY wants to do something for the people - especially at the expense of huge corporate interests - that’s the sort of populist that most people would actively want?
The real time property market, in the UK, then? We have one more week’s hiatus, it seems, until Mr Watkin furnishes us with the first Property Market Stats show of the week. Indeed, he has been in contact to say exactly that.
We will have to refer to my own experiences currently - and they are positive enough. Sales are being agreed on what we have on the market. We have had to do some price drops for January, but they have been well received, they are not extreme (although I do recommend with properties in the 100k to 200k price bracket, when you drop a price you drop it 10k, which is not to be sniffed at of course), and there are plenty of fair offers out there for properties that are reasonably priced in the first place. You definitely need to be realistic as a seller at the moment, though, and if you can’t cure your ails, when you kill off an asset it isn’t an amazing time to sell - the buyers still have the edge thanks to the amount of stock that went on on Boxing Day, apart from anything else.
The MacroCannon rolls on, though. Growth - and there actually was some! The RICS House Price Balance. Rightmove released their “Rental Trends Tracker” which I haven’t highlighted here before - so today changes that. And of course - new year, same closing item: we still need to talk about the gilts and swaps, so that brings up the rear as always.
Growth. I read an excellent post on LinkedIn on Friday - one of those ones that makes you think “why didn’t I think of that” - criticising the publication of monthly growth stats. It was very factual - that’s why I liked it, of course. Quarterly data has not been in the negative since Q4 2023. Monthly data over the past ten years has seen a fall 29.2% of the time compared to 10% for annual data and 12.5% of the time for quarterly data. Some of those have then been revised away (that’s what happened with October 2025’s data in this upcoming report, as a spoiler). Each time, the fodder for the media is stagnation or recession.
Now I’m one of the first in the queue to criticise the Labour Party for their efforts on communication. It’s woeful. But bearish comms don’t help the economy, ever. The argument (from Kallum Pickering, from Peel Hunt, to give the correct credit) is that this is amplification of problems - not helpful. His solution - get rid of it. But then we’d need something else to talk about! How about instead it was replaced with a “nowcast” or a near-term forecast - wouldn’t create the same headlines and might even be more useful? Just a thought to add to the debate.
So - the expectation was a 0.2% negative for the past 3-month period ending November - instead that was a 0.1% rise. Those 0.3% that the forecasters were out was a 0.3% bounce in November rather than an expected 0.1%, and then a revision for October as I said from -0.1% to 0%. That’s a big miss to the upside, and probably does more to reinforce Kallum’s argument than anything else - the press take was that “the return of JLR did all the lifting”. Let’s see.
Services were up 0.2% on the quarter, as always, doing the lifting and averaging out a very ordinary production number (down 0.1%) and finally the cratering PMIs in construction have married up with the GDP figures as the sector fell 1.1% over the 3 month period. That’s the lowest reading since March 2023 which was on the back of a sharp, sudden and brutal revision in the overall cost of capital and the interest rate.
How did November’s number shake down? Services +0.3%, production +1.1%, construction -1.3%. Volatile, supporting Kallum’s argument further.
This left the number at +1.4% for November to November, which is higher than nearly any analyst ended up predicting after the 2024 budget (certainly higher than I did!). A rare mention for “Real Estate Activities” which were the largest positive contributor to services output growth in the 3 months to November 2025. Go figure - although the largest contribution came from “imputed rental”, the first time I’ve seen that phrase in an ONS growth report.
Honing in on the construction side - looking for any positive data - new work decreased nearly 2% in November. The main contributor to the monthly decrease was “public new housing” - down 10.8% (which is gigantic, obviously). Repair and maintenance fell significantly as well. Let’s take a leaf out of Kallum’s book, though, and not get too excited about a monthly fall (although we know December’s PMIs were also woeful for construction).
There was also a huge 0.6% revision downward for October’s construction number. Next month’s quarterly construction figure really could be quite ugly, because December rarely shows growth in the sector of course. Jaguar Land Rover, out of interest, wasn’t mentioned in the report at all (although it has been mentioned in recent months) but the press “found a reason” for the surprise growth. The nerd in me just wants to point out that previous months had been worse than the PMIs had suggested, and that seems to have adjusted in November - that’s it, really. Overall, the growth figure is still fairly congruent with that (or a little bit above, but that’s because of an expanding public sector which is not measured by the PMIs, of course!).
RICS, their residential market report, and the House Price Balance. On this one there’s always a broader theme, and then my thoughts - so I hope you like the format below that reflects this:
1. What the RICS Report Says (Official Sentiment)
The December 2025 RICS Survey portrays a market that is currently weak but showing strong signs of a pending recovery in 2026. The data highlights a disconnect between current activity (which is negative) and future expectations (which are sharply positive).
Current Activity is Subdued:
Buyer Demand: New buyer enquiries remained negative at -24%, marking the sixth consecutive month of decline.
Sales: Agreed sales also fell, registering a net balance of -19%, indicating a continued contraction in transaction volumes.
Prices: House prices are still falling nationally with a balance of -14%, though this trend is stabilising. Regional declines are steepest in London (-42%) and the South East (-32%), while Scotland and Northern Ireland are seeing price growth.
Lettings: The rental market is strained. Tenant demand dropped to -27%, and landlord instructions fell to -39%, creating a supply-demand imbalance that is forcing rents higher.
Future Outlook is Optimistic:
Sentiment has shifted significantly due to the removal of Budget uncertainty and expectations of interest rate cuts.
Sales Expectations: Near-term sales expectations jumped to +22%, and the twelve-month outlook surged to +34%, the strongest reading since late 2024.
Price Expectations: For the year ahead, +35% of surveyors expect house prices to return to growth.
2. Conclusions from Propenomix
My analysis offers a more cautious, data-driven counterweight to the RICS sentiment. While RICS measures opinion in aggregate, I focus on hard numbers which suggest the market is still stagnating rather than rebounding sharply.
The "Zombie" Market: A throwback to last week; the 2026 outlook as a "mild Zombie Apocalypse," referring to a market that is functioning but lifeless, with companies and portfolios surviving on cash flow rather than growth, padding along servicing debt - many households would identify with this at this time I think.
Stagnant Stock Levels: Contrary to the optimism in the survey, our last real-time data indicated that stock levels in December 2025 (678k) were identical to December 2024, suggesting no real improvement in liquidity or supply flow (with more oversupply provided on Boxing Day as reported by Rightmove).
High Risk of Fall-Throughs: The fall-through rate remains high at 25.8%, indicating that over a quarter of agreed sales are failing to complete, a persistent friction in the market - although that’s the average that for some reason we “accept” in the UK.
Cash Flow is King: My overarching conclusion for investors in 2026 is to prioritize cash flow over speculation on capital appreciation, as the "real" economy remains difficult despite improving sentiment.
Summary
The RICS report signals that the bottom of the market has likely passed and sentiment is pricing in a recovery for 2026. However, The Propenomix Perspective is a warning that the underlying data shows a market that is essentially flat ("chugging along") with significant execution risks and no immediate return to buoyant growth. I think when you ask people to forecast out anything more than a few months, it starts to get much more difficult for them; and this really summarises why my forecast for capital growth for the year is a paltry 1.75%, when the rest are suggesting 2% - 4% as a whole. Repair takes time. Notwithstanding Government policy changes!
On with Rightmove’s Rental Trends Tracker, then! This is a report on the last quarter of 2025. The headline: Rents up 2% on average in 2025, and predicted to go up a further 2% in 2026. Please remember - these are asking rents, because that’s what Rightmove can track - not lagging rents or “actual” rents as a Dataloft/ONS sample would measure.
In Q4 however, outside of London fell 1.1% per month - only the second time in five years that that has happened. The actual number was 2.2%, rather than 2%, in terms of the rise over the year. There were 10 enquiries on average for each rental house, comparing to 14 in 2024 and 6 in 2019 (so, smack in the middle of those two).
Compare that to the number of available rental homes - 9% up on 2024, 33% down on 2015. That’s some valuable context right there (also, though, has the rental market become more fragmented since then with the rise of OpenRent, for example - for commercial reasons, Rightmove just ignores that sort of fact of course!).
UK Finance data showed the most positive rate of landlord investment since 2022 (I’m not sure that’s an incredible yardstick - it just means better than 2023 (woeful) and 2024 (a bit less woeful) - but there you go.
Enquiries per property were 7 on average in London but 16 in Scotland and the North West. Their favourite stat of all - how much the 2-year mortgage rate has fallen, from 5.51% average to 4.84% average (no idea if they control for the arrangement fee, hopefully they do!) - still sounds expensive compared to the average yield, to me anyway.
Inner London annual asking rents are up 0.5%, compared to Outer London which is up 1.1% over the period.
Rightmove’s version of yields says that the average Q4 2025 Landlord yield is 6.3% in Great Britain excluding London. On my numbers, only the North East, North West, Scotland and Yorkshire and the Humber remotely stack up showing a yield above 7%, and that’s still pretty thin (although methodology needs to be examined here. If this is average asking rent divided by average asking price for sale, it isn’t a valid metric IMO).
Rightmove also identifies 10 areas with the largest asking rent rises. Some of them are just too small to be meaningful, in my view - but the ones that are sizable enough are all in the North West - Preston, Stockport, and Liverpool.
In terms of the gilts and swaps: The 5-year gilt opened the week at 3.852% and closed at 3.878% - a 2.5 basis point increase. The 5-year swap closed Thursday at 3.59% compared to the gilt yield of 3.868%, so there’s a 28-point discount still in situ as the market settles after the gap down following last week’s announcement in the US about the bond purchases in mortgage backed securities.
On the 30y gilts, they opened at 5.129% yield and closed at 5.13% for the week. Pretty much a complete non-event. We will take it, although as you know I prefer non-events where we shave off a few basis points. My 3.45% predicted “floor” in the 5-year swap for the year is a crazy prediction, but I hope to be wrong, and I also like to try and do the impossible occasionally!
Now - a quick comment on the yield curve. The curve is steeper than last year - true - but tops out below last year’s tops. Then again - January was pretty punchy in 2025 as the vigilantes “had another go” at Rachel Reeves - so let’s see how the next few weeks shakes down. Still. A steeper curve but with less yield at the top is preferable to a shallower curve that’s high yield throughout, in terms of “normal” bond market performance - to my mind, anyway.
Huzzah. That takes us to the Deep Dive once more. It was “reporting week” for many of the major corporates but nothing stood out enough to deserve a full deep dive from those. I’ve left the Scottish Budget alone because of its niche and also because, for a change, it lagged England by introducing its own mansion tax; at half-price of the English equivalent - £1m is a mansion in Scotland, folks.
First up was an interesting and relevant piece of historical work by the Institute for Fiscal Studies - a new working paper on how house prices affect social mobility (I’d rather see “How Stamp Duty affects social mobility”, but there we go). It uses census data over 5 decades, and once again I’ve used the “clarity” format - a summary of the report interwoven with my own thoughts on it, clearly marked. Love it? Hate it? Let me know! There are 4 broad themes that I’ve summarized from the paper.
Theme 1: The "Where," Not the "If" – Reframing Parental Support
Summary: The prevailing narrative often suggests that the "Bank of Mum and Dad" is the primary factor determining whether young people can buy a home at all. However, this new research presents a more nuanced reality. The data indicates that while higher local house prices do indeed reduce homeownership rates across the board, parental wealth does not significantly affect the probability of a child becoming a homeowner (the extensive margin). Children of wealthy homeowners and children of renters face similar hurdles in simply getting onto the ladder when prices rise.
Where parental wealth makes a statistically significant difference is on the intensive margin - specifically, the value of the property purchased and the amount of housing wealth accumulated. The report finds that for every £100,000 of additional parental housing wealth, a child’s own gross housing wealth increases by approximately £15,000 by age 28-37. Wealthier parents aren't necessarily buying the ticket to the game; they are upgrading the seats.
The Propenomix Perspective: I find this distinction fascinating because it completely upends the usual sob story we get from housing campaigners. The assumption has always been that without a cheque from the parents, you’re renting forever. The data suggests that’s not quite true - people are finding ways to buy, but the divergence is in quality.
What we are seeing is the stratification of the asset class. The children of the wealthy aren't just buying "a house"; they are using parental leverage to skip the starter home entirely - or at least the grim, leasehold flat in a transport desert - and jumping straight into assets that actually compound. They are buying three-bed semis in nice catchment areas while their peers are scraping into new-build boxes with dubious service charges.
From an investment standpoint, this reinforces the "flight to quality." The market is splitting. You have the "supported" tier, where prices are propped up by intergenerational wealth transfer, and the "unsupported" tier, which is entirely dependent on wages and swap rates. If I’m betting on capital appreciation, I know which demographic has the stickier money.
Theme 2: The Geography of Opportunity (And the Gating of London)
Summary: The paper identifies location choice as the critical transmission mechanism for inequality. High housing costs act as a barrier to entry for high-productivity labour markets, particularly London and the South East. The researchers found that parental housing wealth significantly increases the likelihood of a young person moving to - and owning in - London.
This creates a compounding effect on earnings. Because wealthy parents provide the liquidity to overcome the massive deposit hurdles in the capital, their children can access the higher wages associated with the London labour market. The data shows that parental housing wealth increases the probability of a son being a "top earner" (top 20% of income), largely because it allows him to live where those jobs are. Conversely, talented individuals without backing are effectively priced out of the locations where their skills would be most productive.
The Propenomix Perspective: This is the "London Escalator" theory in action, but with a pay-to-play turnstile installed at the bottom. Economically, this is a disaster for UK plc. We are essentially misallocating human capital because the housing market is broken. If the next tech genius or top surgeon is stuck in a low-productivity region because they can’t raise a £60k deposit for a Zone 4 flat, the whole economy takes a hit.
For us in the property game, this confirms that London - despite the noise about the "exodus" and remote work - remains the distinct asset class. It is a gated community. The entry price is high, but the "club membership" (access to high wages) is what people are really buying.
However, be careful here. If the only people who can afford to live in London are the children of existing asset holders, the city loses its dynamism. You end up with a very expensive, very sterile playground. For investors, this suggests that the "commuter belt" isn't dead; it’s just moving further out. As London becomes an inherited club, the hungry talent will have to cluster elsewhere. Watch the secondary cities - Manchester, Birmingham, Bristol - where the barrier to entry is lower, but the agglomeration benefits are starting to kick in.
Theme 3: The Inequality Multiplier
Summary: Perhaps the most striking quantitative finding in the paper comes from its counterfactual simulations. The authors modelled what intergenerational wealth persistence would look like if the UK house price boom (driven by falling real interest rates and supply constraints) had never happened.
The results are stark: the house price boom effectively doubled the intergenerational persistence of housing wealth. In a scenario with no real-terms price growth, the rank-rank relationship (how closely a child's wealth ranking tracks their parents') would be 0.14. In reality, it is 0.28. Furthermore, the boom caused living in London to become significantly more concentrated among the children of the wealthy. The rise in asset prices has redistributed wealth from the young to the old, and then, via gifts and inheritance, back to a select group of the young.
The Propenomix Perspective: Let’s call a spade a spade: this was monetary policy working exactly as intended, just with nasty side effects. We spent fifteen years with interest rates on the floor and quantitative easing pumping asset prices, and we’re surprised that the people who owned assets got rich?
The "boom" wasn't some organic miracle of British productivity. It was yield compression. We made money cheap, so assets became expensive. The tragedy - and the opportunity, depending on which side of the deed you sit - is that this creates a feedback loop.
If you are a landlord or investor, you have been riding a wave of central bank liquidity. But looking forward, that tide has gone out. With the base rate holding and SONIA swaps settling higher, that "inequality multiplier" is going to stall. We aren't going to see another doubling of persistence because we aren't going to see another doubling of prices - wages simply cannot support it. We are moving from a capital growth market to an income market. If the asset doesn't wash its face in rent, the "Bank of Mum and Dad" isn't going to save it.
Theme 4: The Supply Side Stranglehold
Summary: The paper uses "housing supply elasticity" as a key variable - essentially measuring how hard it is to build new homes in an area due to topography or planning restrictions. The findings are consistent: the negative effects on social mobility are most acute in areas with low supply elasticity.
In areas where supply is constrained (unable to respond to demand), price increases are sharper, and the reliance on parental wealth becomes more pronounced. The authors explicitly link the misallocation of skills and the reduction in mobility to these supply constraints. The paper argues that policy interventions regarding wealth taxation or liquidity support are secondary to the fundamental issue: if you don’t build enough homes in high-productivity areas, prices will rise until only the wealthy can afford them.
The Propenomix Perspective: And there it is. You can tax inheritances until the pips squeak, you can offer Help to Buy, you can fiddle with stamp duty. But if you have a planning system that makes it illegal to build where people want to live, you will have high prices.
This is the "Planning Tax" we all pay. The low elasticity the report mentions? That’s code for NIMBYism and a sclerotic planning department. We have artificially restricted the supply of our most critical economic infrastructure.
For the investor, this is the ultimate moat. Buying in an area with low supply elasticity (read: strict planning, Green Belt constraints, conservation areas) is the safest bet you can make. You are effectively betting that the government will continue to fail to reform the Town and Country Planning Act - or that the reform of the Act itself isn’t sufficient, because the true problem is viability. Given the political capital required to fix it, that’s a wager I’m willing to take. The shortage is structural, systemic, and, for the time being, profitable for those already inside the castle walls. It wouldn’t be hard to see where new builds just don’t stack up - look at the planning applications. Then buy where there is population growth, infrastructure investment, but not sufficient household growth/planning apps.
Next up, IMLA’s market briefing for December that was released this week. This is the Intermediary Mortgage Lenders Association. This report is an overall economic summary with a mortgage and housing market tilt, and so I thought it was worthy of our attention. It gets the same treatment as the IFS report:
Theme 1: The Great Disconnect - Stagnant Economy, Buoyant Housing
Summary: The UK economy appears to be grinding to a halt, with the latest data painting a picture of stagnation despite a lively property market. Following a robust first half of the year, GDP growth has effectively flatlined. The figures for the third quarter show a marginal increase of just 0.1%, while monthly estimates for both September and October reveal a contraction of 0.1% (we know, as at today, that this has been updated since the report was released - and reveals further folly in hanging too much on these sorts of monthly stats!). The production sector has been a significant drag on performance, falling by 0.5% in the three months to October, a decline exacerbated by a cyberattack that halted lines at Jaguar Land Rover.
Conversely, the housing market has shown remarkable resilience, decoupling from the wider economic malaise. Transaction volumes in October sat 16% above the monthly average for 2025, while lending for house purchases rose by 17%. Even forward-looking indicators such as purchase approvals tracked 7% ahead of the year’s average, suggesting that the broader economic slowdown has yet to dampen buyer appetite.
The Propenomix Perspective: I have said it before, and I will say it again: the housing market is not the economy. If you needed proof, look no further than this divergence. We have an economy that is technically flirting with recession - contracting in consecutive months - and yet agents are busier than they have been all year. Why? Because property is a credit-sensitive asset class, not a GDP-sensitive one.
The driver here is liquidity, pure and simple. The Bank of England has cut rates four times in 2025, bringing the Base Rate down to 3.75%. That is the lowest we have seen since early 2023, and it is greasing the wheels of a market that was stuck in the mud. Borrowers do not care about a 0.1% drop in national GDP; they care that their monthly mortgage payment has just become viable again. However, we cannot ignore the macro headwinds forever. If production continues to bleed and the service sector - which showed zero growth in the three months to October - doesn't pick up the slack, that confidence will eventually crack. For now, though, cheap money is masking structural weakness.
Theme 2: The Two-Tier Labour Market
Summary: A distinct divide has opened up within the UK labour market, characterised by diverging fortunes in the public and private sectors. While headline employment figures appear stable due to small gains over the last four months, the underlying data points to fragility. The unemployment rate climbed to 5.1% in September - the highest level since December 2020 - and the number of payroll employees shrank by 88,000 in the three months to November.
The disparity is most visible in earnings growth. Private sector wage growth has slowed significantly, dropping from a peak of 6.2% to 3.9% in September. In stark contrast, public sector pay has accelerated from 4.7% to 7.6% over the same period, creating the widest positive gap between public and private pay growth since July 2020. This comes alongside the government’s November Budget measures, which included capping National Insurance savings on salary sacrifice schemes to raise £4.8 billion.
The Propenomix Perspective: This is a trend that should worry anyone with a passing interest in long-term fiscal stability. We are seeing a massive transfer of wealth from the productive private sector to the public sector, and the spread is now gaping. Private sector businesses are clearly cutting their cloth - reducing headcount and capping wage increases - because the economic reality demands it. Meanwhile, public sector pay is galloping ahead at nearly double the rate of inflation.
The danger here is the feedback loop into the gilt market. The government is struggling to contain public spending, evidenced by U-turns on winter fuel payments and benefits caps. When you combine high public sector wage settlements with a private sector that is shedding 88,000 jobs, you are asking a shrinking tax base to support a growing state bill. That is inflationary in the wrong way and deflationary in the real economy. The bond markets - and by extension, swap rates - are watching this fiscal discipline closely. If the government cannot hold the line on spending, those mortgage rate cuts we are currently enjoying could reverse very quickly.
Theme 3: The Landlord's Paradox
Summary: Despite a challenging tax environment, the buy-to-let (BTL) sector has recorded a surprising surge in activity. Lending to landlords was up 22% on the 2024 monthly average in the year to October, driven primarily by improving affordability. Remortgaging activity has been particularly buoyant, but house purchase lending also saw a 14% uplift over the same period.
This growth comes in the face of significant fiscal headwinds announced in Rachel Reeves’ November Budget. Key measures include a 2% increase in income tax rates for landlords starting in April 2027 and a new annual tax of at least £2,500 for properties valued over £2 million, effective from April 2028. Additionally, the Budget scrapped the automatic incorporation relief for husband and wife partnerships, a popular mechanism for mitigating tax liabilities.
The Propenomix Perspective: Landlords are a resilient bunch - or perhaps just stubborn. We are looking at a classic case of short-term relief trumping long-term pain. The numbers work today because buy-to-let mortgage rates have fallen faster than residential owner-occupier rates; 2-year fixed BTL rates dropped by 0.75% to sit at 3.53% in November (personal name). That yield spread is attractive right now, especially with rents still rising at 2.3% according to Homelet.
But make no mistake - the storm clouds are gathering on the horizon. The Chancellor has effectively set a timer on the current model. That 2% income tax hike in 2027 and the attack on incorporation relief are designed to squeeze the amateur landlord out of the sector. Investors buying today are betting that rental growth will outpace these tax hikes. It is a bold wager. We are seeing a rush to lock in lower rates and perhaps expand portfolios before the new rules bite, but the window for "easy" BTL maths is closing. The smart money is looking at corporate structures and diversified assets, not just hoping the taxman forgets to collect in 2027.
Theme 4: The Rate Reality and Remortgage Rush
Summary: The mortgage landscape has shifted considerably following the Bank of England's aggressive monetary easing in 2025. With the Base Rate now at 3.75%, borrower behaviour has changed markedly. There has been a significant surge in product transfers since July, with volumes running 54% higher than in the first half of the year. Remortgaging by value also climbed by 42% over the same period.
In terms of pricing, the market has normalised. Variable rates have fallen to become competitive with short-term fixes, though 2-year fixed rates remained the cheapest option in November at an average of 4.06%. Interestingly, despite 2-year products being fractionally cheaper, 5-year fixed rates are gaining market share, reaching their highest level since 2017.
The Propenomix Perspective: This is the "capitulation" phase of the interest rate cycle - and I mean that in a good way. For two years, borrowers have been sitting on standard variable rates or short-term trackers, praying for a return to the sub-2% days of old. The surge in product transfers and the shift towards 5-year fixes tells me that the market has finally accepted the new normal.
People are slowly realising that 3.75% to 4% is likely the floor for the foreseeable future (it might take them another 6 months or a year to REALLY listen, in aggregate - but they are getting there). The market expects two cuts to 3.25% this year. The waiting game is over. Borrowers are locking in 5-year deals because stability at 4% is preferable to gambling on a further drop that might never materialise. It is also worth noting that lender risk appetite is creeping back; lending at 90% LTV has surpassed 8% of the market for the first time since the financial crisis. Banks are hungry to lend, and borrowers are finally willing to fix. It creates a stable floor for prices, but do not expect a return to free money.
Next up, TwentyCi (who power a huge amount of the Chris Watkin data, aggregating all the portal information) produce a Property & Homemover Report at the end of each year, and this was also produced last week. Here we go:
Theme 1: The Volume vs. Value Paradox
The Summary
The headline finding from TwentyCi’s End of Year 2025 report is a striking divergence between activity levels and asset values. The data indicates a market that has found its liquidity, if not its confidence in pricing. New property listings hit a ten-year high in 2025, with over 1.7 million properties coming to market - a 2.1% increase on the previous year. More importantly, transaction volumes have surged; total residential transactions finished the year 10.1% higher than 2024 and, crucially, 2.9% above pre-pandemic 2019 levels.
However, this flurry of activity has not translated into price inflation. Advertised asking prices actually declined by 0.5% compared to 2024, while achieved transaction prices managed a meagre 1.7% rise year-on-year. The time to sell has also drifted out, with the average time to achieve a 'Sale Agreed' reaching 77 days - the longest period in nine years. The picture is one of a highly active marketplace where sellers are plentiful, but pricing power remains firmly with the buyer.
The Propenomix Perspective
I have said it before, and I will say it again: volume is vanity, profit is sanity - but liquidity is reality. This data confirms what I have been seeing on the ground for the last six months. The logjam has broken, but it has broken because sellers have finally capitulated on their delusional 2022 pricing aspirations. We are seeing a "churn" market. People are moving, life is going on, but nobody is getting rich just by sitting on their sofa.
The fact that new listings are at a 10-year high tells you everything you need to know about the "supply shortage" narrative. There isn't a shortage of stock; there is a shortage of quality stock at realistic prices. That 1.7% transaction price growth is effectively a real-terms loss when you factor in inflation and the cost of capital. If you are holding leveraged assets, "steady as she goes" is just a polite way of saying you are slowly bleeding out against your interest payments. We are trading liquidity for value, and frankly, after the stagnation of 2023/24, I will take the liquidity. At least we can exit positions now.
Theme 2: The Wealth Tax Chill & The "Budget Blues"
The Summary
The report provides empirical evidence of the damage wrought by fiscal uncertainty surrounding the November 2025 Budget. TwentyCi’s analysis of the pre- and post-Budget periods shows a sharp contraction in market sentiment. In the run-up to the Chancellor’s speech (1st-25th Nov), supply fell by 7.6% and demand dropped by 4.8% nationally.
The defining blow, however, was the confirmation of the High Value Council Tax Surcharge (HVCTS), colloquially known as the "Mansion Tax," targeting properties over £2 million. The impact was immediate and severe, particularly in the capital. Post-Budget demand in London collapsed by a staggering 20.2% compared to the same period in 2024. While the tax itself - a tiered surcharge hitting a maximum of £7,500 per year for properties over £5 million - is relatively modest relative to asset values, the psychological impact has frozen the top end of the market.
The Propenomix Perspective
The Treasury has once again managed to shoot the property market in the foot to collect what amounts to loose change. They estimate this tax will raise £430 million a year. In the context of a national budget, that is a rounding error. But in the context of the prime London market, they have effectively put up a "Closed for Business" sign to international capital and domestic wealth creators.
The drop in London demand of over 20% is not just about a few oligarchs grumbling about an extra £7k a year. It is about the removal of the aspirational ceiling. When you freeze the top, the ladder stops moving. The report notes that liquidity risk for prime lenders is rising, and I would agree. If you can't sell a £2.5m house because buyers are terrified of what tax is coming next, you don't buy the £1.5m house, and the chain collapses. It is classic spreadsheet politics - looks great on a Treasury model, works terribly in the real economy.
Theme 3: The Rental Reflation and Ceiling Hits
The Summary
After years of headlines screaming about a shortage of rental properties, 2025 saw a significant pivot. The supply of rental stock rose in every single region of the UK, finishing the year 9.3% higher than in 2024. In Outer London, the surge in availability was even more pronounced, with new instructions rising by 14%.
This influx of supply has had the predictable economic effect of capping price growth. The average let agreed price increased by just £8 per month (0.5%) year-on-year. The report attributes this supply boost partly to net migration shifts freeing up stock, but also likely to the "accidental landlord" phenomenon returning as sellers struggle to achieve their desired sales prices in a slow-growth sales market.
The Propenomix Perspective
This is the most interesting data point in the whole report for buy-to-let investors. The "infinite rental growth" thesis is dead. We have hit the affordability ceiling in some areas. Tenants simply cannot pay more, and now that supply is creeping back up - likely from homeowners who couldn't sell and decided to rent out their previous places instead (or landlords who took a look at the sale market, and realised they just couldn’t get what “they know” the property is worth) - the power dynamic is shifting, or has shifted.
A 0.5% rental growth rate is a bummer if your mortgage costs have reset at 5% or 6%. It means your margins are being compressed from both ends. The narrative that "landlords are selling up" is clearly only half the story; yes, some are selling, but this data suggests a new wave of inventory is hitting the portal. If you are modelling a deal today based on 5-10% annual rental growth to make the numbers work, you are dreaming. You need to buy for yield today, because the bail-out of rising market rents has left the building.
Theme 4: The North-South Divide Deepens
The Summary
The regional disparity in market performance has widened significantly, reinforcing a trend of capital flight seeking affordability. While London stagnated, the periphery and the North surged. Wales was the standout performer, recording a 7% increase in Sales Agreed, closely followed by the North West and Scotland, both up 5%.
In sharp contrast, Inner London saw Sales Agreed volumes fall by 6%, and Outer London declined by 2%. Major cities reflected this split; Cardiff (+7%) and Manchester (+6%) posted strong growth, while traditional southern strongholds like Southampton and Norwich saw zero growth, and Inner London effectively went backward. The data suggests a market where buyers are active only where they perceive value, which increasingly means "anywhere but the South East."
The Propenomix Perspective
It is the same old story: yield protects, and value attracts. The South East is expensive, highly leveraged, and terrified of wealth taxes. The North and Wales are comparatively cheap and offer yields that actually make sense on a calculator.
I am not surprised to see Wales and the North West topping the charts. If you can buy a decent family home for £250k in Manchester or Cardiff, the mortgage payments are still manageable even at current rates. Try doing that in Zone 4. The "Levelling Up" agenda might have been a political failure, but the "Pricing Out" reality is doing the job for them. Capital is rational. It goes where it is treated best. Right now, Inner London is treating capital with contempt, while Manchester is rolling out the red carpet. Adjust your portfolios accordingly.
There was one more report that I just wanted to add into the mixer as well. I haven’t covered the subject extensively by any means, but it’s definitely relevant for both area-specific plays and potentially for the difference it could make to the GDP of the nation. The OxCam corridor - and the plan to triple the size of OxCam by 2050. Project Hawking. The UK’s silicon valley. Here we go (it’s a Labour Together paper, so get ready):
Theme 1: The "Hawking DevCo" - A Planning Dictatorship?
Summary: The "Project Hawking" report proposes a radical centralization of planning power to overcome what it terms the "unholy trinity" of local politics, dysfunctional regulation, and lack of money. The core recommendation is the creation of a single, powerful Development Corporation - the "Hawking DevCo" - which would report directly to the Chancellor rather than navigating the usual local government bureaucracy.
Parliament would draw a "tight line" around the Oxford-Cambridge corridor and set a statutory target to triple its GDP by 2050. Within this zone, the DevCo would act as the "supreme planning authority," with the power to bypass local councils completely. As the authors bluntly state, the DevCo would ask local politicians "for advice about how to do things, not permission for whether to do them". This entity is explicitly modelled on the concept of a "strong state" getting things built, invoking the spirit of FDR's Tennessee Valley Authority.
The Propenomix Perspective: Well, they certainly aren't pulling their punches, are they? For years, I have argued that the UK's planning system is less of a "system" and more of a national sport where the goal is to stop anything from ever happening. The "Hawking DevCo" essentially proposes a planning dictatorship for the South East - and honestly, it might be the only way this corridor ever gets built.
The idea of a body that asks for "advice, not permission" is music to the ears of anyone who has sat through a four-hour parish council meeting debating the shade of brick for a bike shed. However, let's not pretend this won't trigger the mother of all political wars. You are effectively telling every local councillor from Oxford to Cambridge that they are surplus to requirements. While the efficiency is appealing, the centralized nature of this beast - reporting directly to the Chancellor - means that if the Treasury decides to turn the tap off (as they love to do), the whole project dies on the vine. It is a high-risk, high-reward strategy that relies entirely on political will holding firm for 25 years. Good luck with that.
Theme 2: The "Money-Printing Machine" and Land Value Capture
Summary: The report argues that the Ox-Cam arc is "rich enough to fund its own growth" through aggressive land value capture. It describes Development Corporations as "money-printing machines" because of their unique ability to buy land at near-current use value, grant their own planning permission, and then sell the land at a massive markup.
In South Cambridgeshire alone, the authors estimate the DevCo could capture £30bn of uplift - enough to fully fund the East-West Rail (£7bn), a Fens reservoir (£3bn), and a Cambridge tram system (£2bn). To enforce this, the report proposes a "Harberger tax" - an annual charge of up to 0.5% on the value of undeveloped land. Landowners would self-assess their land's value for the tax, but the DevCo would have the right to buy the land at that stated value plus 10%, effectively forcing honest valuations and preventing land hoarding.
The Propenomix Perspective: This is where things get properly spicy. The phrase "money-printing machine" usually sets off my alarm bells - usually because it is followed by hyperinflation or a crypto scam - but here, the economic logic is sound, even if the implementation is brutal. The state creating value through zoning and then capturing that value is how the New Towns were built post-war.
The "Harberger tax" proposal is a stroke of genius - or madness, depending on your portfolio. It forces landowners to show their hand. If you say your field is worth peanuts to lower your tax bill, the DevCo buys it for peanuts. If you value it highly to avoid a Compulsory Purchase Order (CPO), you pay a fortune in tax. It is a classic pincer movement. However, let's look at the reality of UK land law. The legal challenges to this "aggressive land value capture" would keep the High Court busy until 2050. Furthermore, expecting to exclude this borrowing from fiscal rules because it is "low risk" is a lovely thought, but the Gilt market might have a different view on exactly how "low risk" a £30bn speculative property play really is. The pressure on private property rights also won’t go unchallenged or unnoticed.
Theme 3: Bypassing the "Quango" Gridlock
Summary: A major hurdle identified in the report is the environmental and regulatory deadlock that currently stifles development. To solve this, the Hawking DevCo would act as a "one-stop regulator," taking over responsibilities from bodies like Natural England and the Environment Agency within the corridor.
Instead of navigating multiple agencies, the DevCo would have the power to discharge environmental regulations itself, balancing legal obligations to deliver infrastructure at pace. The report proposes a "parallel regulatory process" and a streamlined appeals system. This system would replace traditional Judicial Review with a process similar to tax appeals, where there is a statutory presumption that the DevCo's decision stands unless proven otherwise. The goal is to avoid the years of litigation that plague major UK infrastructure projects.
The Propenomix Perspective: If you want to know why we haven't built a reservoir in this country since the release of Back to the Future, look no further than the current regulatory maze. The proposal to strip powers from Natural England and the Environment Agency is bold, bordering on heretical in the current climate.
The report correctly identifies that "dysfunctional regulation" is a primary blocker. By moving these powers in-house, they are trying to mark their own homework - which, to be fair, is much faster than waiting for a teacher who hasn't shown up for a lesson in a decade. The proposed replacement for Judicial Review is particularly interesting. Shifting the burden of proof so the decision stands unless displaced is a massive shift in English law. It would effectively neuter the "professional objector" class that currently holds the country to ransom. It is ruthless, illiberal, and likely the only way you get a single mile of track laid before 2040. Whether a Labour government - typically friendly to the public sector quangos - has the stomach to actually gut them is another question entirely. I suppose they would point to the abolition of NHS England and say “well we’ve done it where needed”.
Theme 4: The Silicon Valley Dream
Summary: The ultimate vision is to replicate the economic success of Silicon Valley. The report claims that if the Ox-Cam region grows as fast as the Bay Area did over the last 25 years, it would become a major source of revenue for public services nationwide. The target is to triple economic activity by 2050.
The authors paint a picture of a "unique mix of technology and pastoral" living, with new towns designed around autonomous vehicles, small modular reactors, and a "Lovelace" railway line. They argue that the region is currently underperforming due to a lack of ambition, noting that housing starts are running at 20-25k per annum - well below the 40k needed just to hit existing targets.
The Propenomix Perspective: We have heard the "British Silicon Valley" line so many times I expect it to appear on the King's Speech bingo card. The comparison is valid in terms of intellectual capital - the report rightly notes the region's massive scientific output - but the execution gap is the size of the Atlantic.
Silicon Valley wasn't built by a central government committee; it was built by a chaotic mix of venture capital, defence spending, and a planning system that - initially, at least - allowed rapid sprawl. Trying to engineer this via a "Lovelace" line and "small modular reactors" feels very 1960s "white heat of technology." It is lovely branding, but unless you fix the fundamental viability of building in the UK (labour costs, material costs, energy costs), all the governance reforms in the world won't triple GDP even on a localized basis. Still, I will give them credit for ambition. At least someone is trying to play SimCity while the rest of Westminster is playing Minesweeper. That last line possibly tells you quite how seriously I take this proposal, though.
So - as we get stuck into 2026 for real, the next Property Business Workshop is filling up. Tickets are in their last days of sale! We start the year with a bang, discussing strategic planning and how to make the most of the next 12 months, with some of our own methods and takes on productivity and time management, alongside systems and processes. The other half of the workshop is about the most common pain point in SME property businesses - accounts, bookkeeping and group accounting. This is about measuring asset performance - not “how to use Xero”, but “how to make the most out of financial information” - what should you be seeing monthly, and how should you interpret it properly and use it strategically to grow your business, safely but quickly?
As always we have real life case studies about our own experiences, and close with our “no-holds-barred” Q+A. Anything individual to consider? Get a VIP ticket and join us for dinner, in a smaller setting with an opportunity to discuss any specific roadblocks or issues in your property business at the moment. Those dinner tickets are nearly sold out now, well done to those who have already booked on - there are 2 left as I write this - don’t miss out! It’s the best way to get a substantial conversation with myself, Rod and other experienced Property Business people - Join us! Thursday 22nd January 2026, Central London; https://tinyurl.com/pbwnine
Above all - please remember to Keep Calm, ALWAYS listen to or read the Supplement, and Carry On. There will be opportunities abound this year and towards 2030 and beyond - the landscape has been set for a surefire bull run. Capital growth looks set to remain slow(ish) at the moment, although if you are in the right part of the UK, you will be well looked after by the combination of that plus inflation, the big bull run needs some runway first (although let’s see what the FCA and PRA do around easing lending requirements again) - but let’s have an amazing Golden Quarter together, it is a case of “here we go” in my opinion.