“Many people take no care of their money till they come nearly to the end of it, and others do just the same with their time.” - Johann Wolfgang von Goethe, German writer.
This week’s quote goes straight to the deep dive and speaks to how well the Bank of England is taking care of “our” money at this time!
Before we go into this week full hammer - Rod Turner and I will be running our next Property Business workshop on Wednesday 1st October, in London - subject matter this time is Investment, with an emphasis on what metrics you really need to be considering to run your property business properly, and building your business to scale. We’re digging into the real fundamentals of property investment for growth—from proper valuation and strategic debt structuring to the investment metrics serious pros use (hint: ditch ROI and yield). Learn why some deals work for some and not others, how to manage risk as your portfolio scales, and when to shift gear from side hustle to scalable business. We’ll break bottlenecks, build strategic pillars, and unpack real-life case studies of fast company growth. How have we done so many deals? We’ll tell you!This is your LAST CHANCE to book the EARLY BIRD tickets with 20%+ off, now: http://bit.ly/pbweight
Trump - a little nearer so a little easier to watch this week…..
Before commenting on the state visit though - the “big stuff” this week was a rate cut of a quarter of a percent (leaving the US still a long way adrift of the 1% “recommended” by the Prez) - the first cut this year. It was very much a known quantity, but if you gauge the “success” of the cut by the 10-year T-note, which is the most liquid one of all - the yield drifted upwards, by about 0.1%, by the end of the week (a little spoiler there for the UK bonds section!). The other major news was housing starts slipping downwards more than expected, from 1.429M to 1.307M (a drop is expected in August, but it was a bit more than double the drop that was expected).
Our eyes were and are on Stephen Miran, the favoured appointee - he and he alone voted for a 0.5% cut instead. This was the Fed’s first cut in 2025. The expectation now from the Fed is 2 more cuts this year and one in 2026, with adjustments upwards to expected growth (but they are really quite modest, 1.6% for this year, 1.8% for 2026 and 1.9% for 2027, with 2.6% inflation as measured by PCE for 2026 too, and unemployment predicted to be at 4.4% for 2026). The cut was based on a weakening labour market and moderated growth - but the Fed actively commented on the balance between inflation being above target and easier monetary policy, as you’d expect them to do. The reaction was mostly felt to be “muted” - the treasury note drift was fairly mild and fairly slow.
OK - the visit, then. Pomp and circumstance, etc. Leaving the fractious parts aside, and focusing on the economics - it was always going to appear to be a big win, because massive investment was guaranteed - and so it was pledged. Blackstone at £90bn. The question that inevitably arises is “are we happy with the US owning so much of our AI infrastructure?” - funds flowing offshore to wherever they get to, ultimately, are not as good as them flowing into our pension funds for profitable, long-term, infrastructure investments, of course.
It’s all tech, AI, quantum computing and cloud infrastructure, but the UK wants to be at the forefront of advanced tech, so - its a case of picking your partner, and ours is almost already picked by default. Plans for advanced/small nuclear modular reactors also moved forwards, with a £10bn deal involving Centrica and the US firm X-energy. 2500 jobs, 1.5m homes powered, Hartlepool-centred. This involved some regulatory streamlining too.
Trump pulled out all the stops politically as well, calling the visit “truly one of the highest honours of my life”. The “bond of kinship” was called “priceless and eternal” and “irreplaceable and unbreakable”. Until the next tariff negotiation?
Starmer’s ratings couldn’t get much worse, so he is punting that the unpopularity of the visit in some quarters was trumped (pardon the pun) by the investment announcements. We can’t pretend £150bn isn’t a huge amount of investment, but how much is thanks to the special relationship will remain a matter of debate.
Most of the rest was discussion not action, with some mention but no movement on steel tariffs, for example. Arguably it helped Starmer that the president seemed to have forgotten who Peter Mandelson, the “Prince of Darkness”, actually was now he’s been “moved on” from the ambassadorship to the US.
OK - to the real time UK property market. Chris Watkin delivers once more - Week 36 in the book. Listings printed 37.4k, in what’s always a lumpy week. My “10% more stock than a normal market” ready reckoner is still working on the back of circa 2 years of overperformance in listings compared to historical averages. There have been 1.3m homes listed this year so far! We are 10.8% ahead of the 9 year average, but that does include 2020 which pollutes the figures somewhat. We are really inching back towards the 2024 numbers now, week by week, having been 6-7% above them at various points in the year - but we are still listing more than we are selling (as always), so it is all eyes on the withdrawal rate as a general rule. We are only 3.1% ahead of the 2024 listings YTD now, but are still 10.7% ahead of the 2017-19 average.
Price reductions in week 36 - 26,280. August’s completed number was only 11.1% for reductions - much lower than the 14.1% reduced in July, 14% reduced in June, compared to last year’s 12.1%, May’s 13.4%, and the 5-year average of 10.7%. 2025’s average is 13.1%. More stock, more reductions - absolutely and relatively. 22% more reductions than the 5 year average, if you take the difference between 13.1% and 10.7%. “25% more reduced properties than a normal market” also works as a ready reckoner, or is likely to even be an underestimate just because of the amount of stock out there. We’ve still had around 90 to 95 thousand price reductions in the last month. Can’t find a deal? Just keep the legwork up and you’ll get there. You don’t tend to see 13%+ of stock being reduced in strong markets, by any stretch. Holidays slowed things a little but sideways pricing is continuing. As usual we won’t read too much into August’s activity.
25.6k homes sold subject to contract, again rebounding after the bank holiday. The 2025 average is 26,200. Healthy is still the best description. SSTCs are up 6.2% year on year and 13.6% on 2017-19, and still nearly keeping pace with 2022 (as we near the “day of the lettuce” in historical context). With SSTCs up 6.2%, whereas listings now are only up 3.1% on last year, this signifies more “intention to transact” than 12 months ago, to this point in the year, for sure - or, put a different way, comparatively this looks like a more functional year than 2024 was (even though stock numbers have continued to rise throughout the year).
We went into September with 736,333 homes on the market - a reduction of over 25k on 1st August’s number. I have been waiting for this month, but am loath to draw conclusions given that it was after August. However - if we look back at the past years, September 1st’s number is not usually a drop - and certainly not a large one. It does look like we might well be past peak listings, but it will take 2-3 months to really establish a trend (and will there be a consistent one?). We need more sales agreed for that to happen, and in a week like this with only 25.6k gross sales but 37.4k gross listings, you wouldn’t expect that number to go down (early September rules apply for this week under discussion, however, where we often get a glut of listings).
For context, as the market got stickier before the pandemic that number was c. 660k, a sellers’ market is more likely to be under 600k. At the end of August 2024, 710k were on the market. September’s figure will be interesting as we don’t watch the number of properties withdrawn from the market week-on-week.
Chris also looks at the per square foot on sold STC properties - it has a very strong correlation with prices that hit the land reg in 5 months’ time. This time round - August was at £338.78/sqft and that was 1.41% higher than August 2024 and 14.25% higher than August 2020 - but down 2.2% on June’s SSTC number of £346.45 and down 1.75% on July’s number of £344.78. This is a pretty dramatic drop and may well revise our number for this year, when the figures hit the land reg, down into the 1.5%-2% region for 2025 (it isn’t quite an exact science, although these figures are the most helpful of all of them out there). I think this can be put down to August plus stamp noise, potentially, but if you saw Halifax or Nationwide revise by that sort of number, all hell would break loose (bearing in mind what happens when they talk about prices going down 0.1%!). The increase of only 14.25% since August 2020 with the backdrop of what wages and prices have done since then signifies a big real-terms haircut in property prices over that 5-year period. Never judge by one month, especially when it is August!
Fall throughs stayed slightly above the long-term average of 24.2%, printing 24.8% - there’s still been very little volatility around the long-term average for many weeks now, and that one is a bit noisier than most, but perhaps because of bank holiday “catchup”. The net sales are still there or thereabouts - 19.2k, 5.2% up on last year and 10.1% higher than 2017-19 - not quite at 2022 levels (about 12k behind, now, total, edging closer week-on-week) but let’s see where we get to by the end of the year - I think it will be a close run thing on transaction volume compared to 2022 in a much less volatile year.
I always give Chris a weekly shout out here because he’s more prolific than “just” this epic tome he releases weekly on the UK property market - he comes up with some great stats on a regular basis. Drop him a like, subscribe, and all the rest of it and some kind words for his content creation. If you are in the industry and want support in growing your business or to be a more effective communicator/be more in touch with your local market - that’s his core business - give him a shout. The article gets published on the Property Industry Eye website, and the video on his YouTube channel - @christopherwatkin
- Over to the macro side of things - Macropulse, the heartbeat of the economy. A chunky week - Unemployment and Inflation to report on first up, then into the ONS index of Private Rent and House Prices, finishing with the gilts and swaps as always.
The labour market report never reads particularly well these days. Payrolled employees were down 142k on the year, or 125k quarter-on-year. That’s the impact thus far of the inherited situation (in which employment was OK, but inactivity far too high - not necessarily all policy-driven by any stretch, with some pandemic lag effects as well) - and also the policy implemented since the new Government came to power. Miserable reading - with around half of those jobs that have gone being in hospitality, the most beleaguered sector of all.
Let’s remember the rub, though. I haven’t changed the way I analyse this report; the change of Government doesn’t change the facts. The employment rate of 16-64s is UP on 12 months ago and has been trending upwards - 75.2% is progress, although 76%+ has to remain the target. The unemployment rate of 4.7% (seeking, 16+, no upper limit on age) - which was a hold on June’s numbers - is also UP on 12 months ago. How? Inactivity is down, and down to 21.1% - this is the trend that needs to continue.
Vacancy numbers were down once again - a trend we really don’t want continuing - 38 consecutive months where the quarterly figure has dropped. However, they were down 1.4%, by 10k, to 728k. Much less stark than the numbers around the time of the employer’s national insurance increase, as you’d expect.
The public sector carried on growing, adding 17k jobs over the quarter and 75k jobs over the year. Very much in line with expectations for Labour. Puts into context what’s happened to the private sector, of course. The next figure is a key one - because it defined what happens to pensions next year thanks to the unsustainable “triple lock” agreement - earnings including bonuses were up 4.7%, and as the highest of the three parts of the triple lock (2.5%, earnings, and inflation in September - not guaranteed as it hasn’t been announced yet of course, but we know it will be 4%ish not 4.7%ish, and we won’t be THAT far off!). That also breaks back to an average of 4.7% pay growth in the private sector and 5.6% in the public sector.
These numbers are big - but when adjusted for CPIH, which includes housing, show a real-terms increase in pay of 0.5% for total pay. If you adjust for CPI, that becomes 1% - which really just shows how high inflation is, since 4.7% in and of itself sounds pretty generous.
Then we have lost work days - well we know about the strikes in July for doctors, and they get the blame according to the ONS (or the health and social work sector does, anyway) - with 83k working days lost due to strikes.
So what are the trends? Payrolled employees continuing to fall, vacancies the same, pay growth also the same but staying fairly strong, real earnings still trending down but just about staying positive, and the inactivity rate still trending downwards too. Mostly bad news, but a few positives hidden within there (pay growth needs to moderate to keep the Bank of England happy, and economic inactivity is one of the most undesirable parts of the report!). The overall report is not all negative, is really the point to take away, although there are a number of things to worry about including a lack of job vacancies/a lack of job creation outside of the public sector, and unsustainable pay rises particularly in the public sector too.
OK - if that didn’t cheer you up, I’m sure inflation will……maybe. On the bright side, CPIH was down from the month before - on the down side, it was down by 0.1% from 4.2% to 4.1%. Just like with the labour market figures, the economists predictions were spot on, here, so for once there were no surprises anyway. CPI stayed at 3.8%. What was down? Air fares, but restaurants and hotels and also motor fuels went the other way and went upwards.
Core CPIH was “only” 4%, down from 4.2%, and core CPI was up 3.6% down from 3.8%. Services inflation is STILL around the 5% mark, but slowed to 4.7% - it has been years at this sort of level and above, and that (making up 50% of the CPI figure, essentially) shows why the numbers are where they are!
One of the more niche numbers that I watch monthly is OOH, the owner-occupier measure of housing, that the ONS constructs. This was down to 5.3%, its lowest number since 2023 - still too high, but much more manageable and on the way down under 5% at a fairly rapid rate (and converging back towards a measure around or under CPI/CPIH, as it was for many years before inflation really started to accelerate in mid-2021).
One more number to pull out is food inflation, because of the disproportionate effect this has on lower-income households - 5.1% is the print now, up from 4.9%. That’s 5 increases in a row, and puts it higher than everything since January 2024, although the peak in early 2023 in food inflation was 19.2% (in March 2023). The trend isn’t ideal, though.
As per the labour market, inflation numbers are not great. You might recall that the September number is expected to be even higher - most of this comes from the base effect of September 2024’s inflation number, which was particularly low (as low as 1.7%) - that low watermark, as it drops off, leaves an even higher shadow on next month’s report and that’s why expectations are at 4% and above. This number defines the number for index-linked benefits (save the triple lock which has been defined already by the earnings number) - and tells us how well welfare will pay next year, versus work.
How about the private rents and house prices? Rents are “only” up 5.7% in the past 12 months now, based on August’s figures, whereas house prices were up 2.8% in the year to July according to the ONS. That 2.8% is a large slide from 3.6% quoted for the year to June. There still seems to be some tinkering with the house price index methodology - something changed this month, just as it did last month, and there’s a fair revision downwards. We get used to it!
With that in mind, the gap between the rent increase graph and the price increase graph remained about the same as it was for June, when we add July’s numbers. The regional stories didn’t change - the North and the Midlands had higher than average house price inflation in England, and the South was below average - London remained bottom of the shop, up 0.7% year-on-year.
The only difference in the regional rent statistics was that London remained much closer to the average, although the media has been awash with articles discussing the lack of rent growth in London - this is the classic situation of “new rents” (down, year on year, on most figures) and “total rents” - 75% of which are existing rents, and 25% of which are new (nationwide, although that varies regionally). The trends - on the way downwards, although my sense remains that the current market is still mostly sideways for both rents and house prices.
Sweeping onto the gilts and swaps, then - it was an up week for the yields, I’m afraid (I hear you boo). The open was a little step down on the Friday before, opening at 4.101%, and closing at 4.134%. Just over 3 basis points the wrong way. The trend was downwards, by a very small amount, until the Bank of England meeting, after which it drifted up steadily until the close; Friday’s consumer confidence numbers weren’t great and that drove things upwards on the yields by a small amount.
Thursday’s 5y gilt close was 4.102%, and the swap closed at 3.751%, preserving that discount around 35 basis points as has been the case for some time now. One year before the number was 3.514%, which supports the fact that mortgage rates really haven’t moved down much in the past 12 months.
How about the longs? Well, the 30y moved up just under 6 basis points for the week, opening at 5.504% and closing at 5.558%, so sadly the gilt curve steepened ever so slightly. The news on Friday that we once again borrowed quite a bit more than expected (£18bn versus expectations of £12.75bn, a miss by a fair mile) meant that the long-term situation once again looked even worse than it already did. Cheery stuff, eh?
With that in mind, we move on to the Bank of England meeting, of course. The headlines you will have seen - we held the rate, and you knew we would, at 4%. Again there were no surprises as the market expected a vote at 7-2 to hold (versus a cut) - as I speculated after the last meeting - and that’s exactly what we got. We knew Taylor and Dhingra would vote to cut, and they did not disappoint. They voted to cut by 0.25%, nothing else - and they stood alone as the two most dovish members of the committee.
There’s no particular update in the “infill” meetings like this one, as there is no full inflation report published. There really was a limited amount that no-one saw coming, which is why this meeting didn’t really move the needle when the rate decision was announced on Thursday lunchtime.
On the bright side, UK GDP was up more than expected for Q2, compared to the last forecast (which was last month). The improvement in the PMIs was noted, as was the fact that sentiment largely remained fairly low with no real expectations for output pickup until 2026. In spite of the latest print at 4.7% for wages, the claim is still that the 3.8% prediction number should be hit by the year-end.
I spat my tea out as I got into the detail, and saw that over the next 12 months, from £13bn of gilt sales that the market doesn’t really want at the moment (what we actively sold in the past 12 months at significant losses and cost to the taxpayer), the Bank decided to move to selling £21bn of gilts over the next 12 months including some long-dated bonds which will be sold at a gigantic loss. This really and truly makes me furious, and the lack of will to do anything about it by the treasury as many hundreds of millions, and billions, continue to be actively set on fire because “it looks like the right thing to do” (which has a questionable logical case behind it anyway) - I wrote at length about this some weeks back, and won’t re-hash that whole argument - but - AAARRRRGHHHH!!!!
Seven nodding dogs agreed with this decision. One wanted to sell more - and one “only” wanted to sell £13bn worth (like the past 12 months) not £21bn. Who was the one who wanted to sell less? Catherine Mann. Who wanted to sell more? The chief economist, Huw Pill. It disappoints me that no-one makes the case for saving the money - but the real sin is that this is not part of the Bank’s brief (getting value for money for the taxpayer). I know, I know.
Further annoyance at my end was on the basis of the slowing of QT, from a reporting perspective - this is simply because of maturities (the bonds that are not actively sold just mature, and are retired, with no “booked” loss to the Treasury). We really need to be focusing on these active gilt sales.
The final “big question” is whether there will be a follow-on rate cut in November; now the chances sit at around 28%, according to the markets, which has decayed and is more in line with the chances of that (I’d still be around 20% rather than 30%). We “know” September’s inflation number will be ugly. We know what the labour market is doing, although at least some trends have slowed down. How will growth go? PMIs have looked OK, but I’ve made the point that they don’t necessarily track growth, month on month, precisely. We wouldn’t expect a pullback, though. The rate decision is before the budget, so that won’t have any impact either.
Keep calm on rate cuts and expect the next one in February 2026, as we stand today - but there aren’t a ton of cuts in the pipeline anyway - the “smart” money says 2 cuts next year at this point, but there’s economic development (and a budget, and who knows what will happen to the Labour senior leadership team when under massive pressure after local and devolved elections in May 2026!).
Before I do close, LAST CHANCE to book your EARLY BIRD tickets to the next Property Business Workshop that Rod and I are running on Wednesday 1st October in central London. This time around - investment metrics and how to run your property business at scale. My favourite topic of all! Book here: http://bit.ly/pbweight
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. It will be slow(ish), and take a little while longer to get off the ground - and the amount of stock around is still keeping things suppressed at the moment - but as yields currently continue to improve, it is a case of “here we go” in my opinion.
