"Show me the incentive, and I will show you the outcome" - Charlie Munger, legendary investor.
This week’s quote pertains to the deep dive, as ever, as I get stuck into a number of reports including the Government Warm Homes Plan which takes centre stage. All sorted now, is it? Let’s see…..
As the calendar advances through the Golden Quarter, our next Property Business Workshop is live and tickets are already selling. This is about structure, and exit - yours, and others. No exit plan? You go out one way or another. Things have changed, as well, with pensions being brought into the scope of your personal estate. What does this mean for SSAS - according to people that use them, but don’t sell them - an objective viewpoint. Book in on the next Property Business Workshop with myself and Rod Turner - Wednesday 22nd April - Central Manchester - https://bit.ly/pbwten10
A quick appreciation snippet for both my business partner Rod Turner who was “en fuego” this week at our Property Business Workshop in London - various AI-enhanced clips are available - and every attendee who trusted us with their valuable time to come along, attend, and participate as we attempted to “solve” productivity, strategic planning, and financial accountancy, bookkeeping, group accounting and the likes.
Trumponomics is up first, of course. He wouldn’t accept any other slot now, would he? Hard to move too far without bringing up Greenland, of course - and we’ve seen a number put on what I think is inevitably an acquisition, which is the official White House line (rather than bothering ourselves with the Donald’s hourly puffery) - this word is deliberately being used. A snip at $700bn (sounds like a lot, but likewise for the mighty US - sounds like nothing).
Bad news - he wants to pay $33 and a bag of chips, or a deferred deal over 1000 years, of course. OK, artistic licence at play there. But the deal is EVERYTHING, as we know, with Mr T - so let’s see what happens. Don’t play ball, get some tariffs. Tiring, to be honest. TACO trades being mentioned all over the place - Trump Always Chickens Out. Markets recoil, he changes his focus and rhetoric. Chicken soup it was, as the chat changed to “a framework for Arctic Cooperation”.
If you are a conspiracy theorist, very little offers more fuel than Davos and the World Economic Forum. Trump was humbled, if you are a leftie, by Mark Carney this week - if you are more Trump-curious, he simply came into line with what Trump has been saying - take security seriously instead of underinvesting in defence and relying on the peace dividend and America being the world’s policeman. What do I think? Well, as usual Trump’s America is fairly easy to understand - you guys need to spend a LOT MORE on defence, and by the way - we sell some great stuff in that department. Now - go too far, which arguably has already been done, and those countries just DON’T buy American - which is what they’d be sensible to do. The “Preston model”, it was coined as, at the local authority level.
However much we don’t like him or trust him at the moment, we still like and trust him more than Putin or Xi - and he also knows that. However, by driving the “middle powers” together, as Carney coined, some of this definitely runs a risk of backfiring for the US. Just as the (developed) world has reshored some production and manufacturing and hedged its bets against the dependency on China being the world’s manufacturer when Covid came - the US are actively influencing just where items get purchased from.
Yields started to drift, also, the wrong way on the back of some of the rhetoric this week - that also starts to impact the UK, of course - and we will cover that later on. The rest of the UK-centric Trump news concentrated on the critique of the Chagos islands deal, which he’s been vocal enough about.
OK. Watkin is BACK and so we rush back to the relative calm of the UK real time property market. The time for speculation over the past month is over - the time for real stats is upon us. Can you hear the delight in my voice?
This covers week 2 of the 2026 market (Chris goes Sunday to Sunday, so this was the week ending 11th January). We managed even more listings than in 2025 - just about - so far (61,351 versus 61,161). The glut of listings looks somewhat back, at the moment - following on from Boxing day and record listings according to Rightmove, which have been lost in Chris’ real time stats, because he’s been on hiatus.
What about reductions? Only 7.6% of homes were reduced in December, and 2025 closed with an average of 12.8% of homes being reduced each month. Just over 1 in 8. Nearly 20k reductions is less than the start of 2025 (21,690) but nearly 20k reductions is still an outlier compared to every other year since 2017.
At the start of a year you often see significant gaps between asking prices of listings and sales agreed - and this week was no different. £423k average listing price - average SSTC price £346k. That 22.2% difference compares to a more typical range of 16-17%. SSTCs were up to 21,200 from 17k in the first week of January. The week 2 average is 19.6k over the past 10 years, so transaction volume looks healthy in this snapshot. The other comparisons are just too early in the year to be meaningful (and a lot depends on what day of the week a year starts on, of course).
Net sales for week 2 2026 were 15.8k, which look healthy compared to the 10-year average of 14.4k. Volume looks OK. How about prices psqft agreed? I am cautious of this metric just at this time because of the distortion that occurred around the 2025 budget - but December was up 0.6% year-on-year, and considering that’s what the Nationwide plumped for for 2025’s growth - maybe it is just accurate. The land reg figures are unlikely to look that exciting for the next few months if that number has not been overly distorted by taxation rumours that disturbed the market about 500k.
To start January there ended up being a 10-year+ record number of homes on the market, 613,882 thanks to this record Boxing day other than anything else - 2025 started with 605,088 OTM. One more stat before drawing our first Watkin-breakdown of 2026 to a close - Available rental properties in December 2025 in the UK - 285k, compared to 258k in December 2024, and 235k in December 2023. Supply is increasing again - a longer timeframe is needed to put all of that into context but if new rents are flat, or even down - which some are telling me they are - 10.5% more stock than the year before tells a story, of course.
Chris - it’s great to have you back, mate. Cheers! Onto the Macro Outlook now. We had the labour market report and unemployment figures - with the (currently) usual fuss around particular items, including youth unemployment. I usually call this week “meat week” because there’s plenty going on - and the labour market figures are followed up by inflation numbers. Guess what…….no need to, I’ll tell you. The ONS house prices and rents were out as well, and that’s bullseye as far as we are concerned. Then, 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.
Unemployment and the labour market then. Everything is fine, right? Nothing to see here? You know that isn’t true. The economic consensus was that November would see a pullback to 5% unemployment - but that didn’t happen. It stayed at 5.1% instead. The year-on-year and quarter-on-quarter figures didn’t raise a smile either - 135k payrolled jobs lost over 12 months, and 43k over the Sep-Nov 2025 quarter. Sad times.
December’s early estimate forecast looks terrible - but these early estimate forecasts haven’t been up to much, so I’m sure we can do better than the estimated 43k MORE net jobs that the early estimate suggests that we lost in December. The retail figures weren’t so bad in general, so we haven’t seen an incredibly disappointing Xmas or anything - although my anecdotal “December adventures” saw a lot of quiet venues out there (or perhaps I hang around in the wrong places?).
When we get to the meat - and the layer beyond the headline unemployment figure - we see employment at 75.1% - unchanged in the last quarter but UP on one year ago, still. How, when unemployment is up so much? Well, because fewer are “economically inactive”, that dreaded measure. That number is 20.8%, and at this point I always point out how this all miraculously adds up to 101% each time (because the unemployed are not bounded by their age - it is just “people over 16 looking for work” - the other categories are bounded by the 65th birthday of the people in question.
Where we absolutely aren’t, according to Bank of England forecasts, is “wage rises under control” - primarily because of this huge gulf currently between public sector pay rises and private sector pay rises. The blended number is 4.7% including bonuses (over 4% makes the rate-setters uncomfortable) - 3.6% for the private sector would be fine as the whole number, 7.9% for the public sector is not fine. I’ve been into long arguments before around what needs to happen to public sector pay (spoiler alert - I support it coming up to at least private sector pay, with the bargaining chip being pension reform - so not to clip total remuneration, just to have realistic pension liabilities rather than schemes that are simply unsustainable and more importantly offer incredibly bad value to all involved). There is a “base effect” here that the ONS promise will be phased out over the next 3 months (basically, some pay rises were brought forward, and so there were 2 rises in one year - but you can see that those 2 rises were clearly also above 3.6% each, to get to 7.9%) - we have to “wait and see” as usual but the real conversation - in my opinion - is still not being had. Employers (and we know who the employer is in the public sector) have a 40% average cost of an employee’s salary on top in the public sector compared to 16% in the private sector. It’s nuts.
Inflation has hurt what should be a majestic pay increase - the real terms, after CPIH (more realistic than CPI, including housing costs) increase of 0.8%, or 1.1% for CPI-adjusted, is on the right side but probably half of where you’d want it to be in a healthy economy where consumption could grow at a nice, sustainable level and feed through into economic growth. Instead, it’s just inflationary growth all round, really.
155k working days were lost to labour disputes in November 2025 - the highest number since January 2024, because - of course - of the doctor’s strike. A step backwards there.
Quietly hidden in the data there IS a reason to be cheerful, however, so let’s make the most of it! 10,000 more job vacancies over the quarter, and that represents the best of the basically flat last 6 months, after vacancies have cratered post-covid. Better up than down!
The inactivity rate being down 0.2% over the quarter could be subtracted from the unemployment rate - what do I mean by that? That 5.1% in November is the equivalent to 4.9% in August because the extra 0.2% is because of people actually seeking work rather than not seeking work, for whatever reason (students, long-term sick, looking after the home, retired early). The breakdown of those 4 categories - out of interest - 2.8m long-term sick, 2.5m studying (traditionally the biggest group), 1.7m looking after the home, 1.1m early retirement.
Still - the unemployment rate in August? 4.8%. However you slice the lemon, it’s hard to not come back to Rachel Reeves’ employers’ national insurance shock of October 2024. Labour absolutely needs to be held to account for not creating enough jobs, or destroying too many, or both. The moves around the minimum wage for young people have destroyed youth employment, 16-24s are still sitting at 15.9% - so that won’t count sick, looking after the house or students, remember. 38.6% are economically inactive - we have to remember how many are students, of course, but if we then take a moment to appreciate that only 51.7% are in work according to the ONS (and yes, that doesn’t add up as usual) - roughly half of 16-24s being in work doesn’t feel as healthy as it should, certainly not to me!
OK. Limited, very limited, reasons to be cheerful. I highly doubt the private sector vacancies are up - the 10k increase needs breaking down to see if it is public or private sector, but the ONS don’t go into that level of detail (even though they should). The public sector has done markedly worse than the headline figures, because the public sector has propped it up (with the funding coming from the private sector, of course). The Bank of England’s initial analysis suggested that it would take 2 full years for the ENIC shock to work through the system, and so we still have more than 50% of the time to go (although it’s fair to reason that more than 50% of the incidence has taken place, you would think 60%-70% perhaps - there’s still more self-inflicted harm to come throughout 2026). My prediction for unemployment by the end of the year? 5.7%, for reference.
Will inflation cheer us up? Perhaps it should. I do always say that we are the second biggest beneficiaries of inflation, as property investors, behind HM Government. That’s because of all that nominal debt, and it being inflated away by rent increases and the likes. However, when capital values only move a very small amount, the “low effort” part of the deal - when it is less than the frictional cost of selling a house, for example - then there’s the tax to consider - won’t placate anyone.
Still - a reminder of where we were - it was 3.2% for November, the consensus was a small bounceback to 3.3% for December (prices always go up for Xmas, retailers aren’t stupid, right?) - instead it printed 3.4%. Above the forecast again. Core inflation, however, was on the button at 3.2%, still the joint lowest since late 2021. It ALWAYS comes down in January, and often gaps down a bit - partially “how deep are the January sales” - RPI hit 4.2% for December, with a 0.7% increase month-on-month. There’s always the base effect of last January dropping out as well, of course, so that suppresses that impact. Month-on-month CPI for January 2025 was -0.4% which is pretty typical, so I’m not sure that will have much of an impact either way. At a push I’d suggest Jan inflation will be down a bit, but not a lot, when we get the figures.
The ONS prefers CPIH, from a data integrity perspective, and that printed 3.6% up from 3.5% in November. That’s the equivalent - largely - to the CPI inflation rate in the US, because it includes the housing costs. Where were the upward pressures? Alcohol, tobacco and transport. Sounds like a fun month.
CPI and CPIH services converged at 4.5%. I’ve maintained that it is “hard” - given they make up 53% or so of CPI - to get to 2% inflation when they are still running this hot. Minimum wage is up 4.9% if you include the increase in pension contributions and ENICs to the 4.1% rise. Business rates are now capped (gee, thanks) at only a 15% rise in the struggling retail, leisure and hospitality sectors. Council tax we haven’t seen yet - but the conventional wisdom states that budgeting for a 4.99% increase is the best strategy. Is this feeling like 2% inflation in Q2 for you? Now there’s some base effects dropping out, and that guaranteed drop in energy bills too - that’s estimated at around 7% off thanks to the Government moving some of the obligations into general taxation away from energy bills. Still - I’m not buying it just yet, folks.
OOH - the housing inflation measure that is injected into CPI to make CPIH - dropped to 4.2%. A successful 2025, ultimately, down from 8% in January to a much more sustainable 4.2% in December. It still puts CPIH above CPI of course, because it is still above CPI. It is moving downwards rapidly, though.
Down to the more granular bits - food inflation of 4.5% - again likely to be impacted more than other industries by the minimum wage increases - and the one that hits the poorest the hardest. Not a great number. The last time that rent inflation contribution to CPIH was lower than it was in December was May 2022 - so the wave has been ridden now, and the pain has (in aggregate) mostly been taken, although rent rises below 3-3.5% look unlikely and even though my “UK number” is 3.5% for 2026, that’s actually quite bearish (I’m above this figure in the Midlands and the North, but adjusted downwards by London and the South East).
So - my inflation number for the end of 2026, for context - 2.7%. I was 0.3% out for last year (I said 3.1% by the end of 2025 in my January prediction, and it printed 3.2% in November but that came back to this 3.4% print in December). Close. Back to target/low 2s? Let’s see, I’m going to need to see the evidence of that and I still don’t believe that the Government really wants that anyway…..
Moving on to those house prices in detail, then. The index that never makes the headlines but the only one with all the transactions. November 2025 is still where the ONS is at for prices - but they see prices up 2.5% year-on-year at that point, up from 1.9% in their October figure. My estimate has been 1.5% from the Watkin data, but I might have undershot it - my original prediction was 3.75% for the year, so I definitely over-egged it, but who knows where that final print will end up. My prediction for this year? 1.5%, as it goes - again, higher in the Midlands and the North but tempered by London and the South East who will continue to struggle on pricing in my view.
Rents are closer to real-time, remember, in this report and the December figure was rents up 4%, down from the 4.4% November print. The ONS still has London rents going upward (they have the best dataset here, a dataloft set of 550k rents, both new and existing) at 2.1% - but the North East leading the charge at 7.9% upwards. Welsh rents lead the home nations' charges alongside Northern Ireland for differing reasons, I’d suggest - both printing 5.7%. Scotland, still adjusting after the rent cap days, printed a sustainable and sensible 2.8%.
On the flip side, Scotland capital values charged forwards at 4.4%, and England at 2.2% - Wales printed 0.7% in the same time period.
This is a good time to talk about “why the gap” between Halifax, Nationwide, and ONS. Firstly, it is often observed that the two biggest industry indices are more predictive, and so run a few months ahead of the ONS. Most graphs set Nationwide/Halifax back about 6 months to try and show the correlation. Secondly, we do not know about methodology - but there will be a difference in datasets of course and a difference in calculation, you can be sure of that. Lots and lots of more expensive houses were not selling or were held off the market in the first place - and with that in mind, it could have led to falsely low prints for Halifax and Nationwide - ONS could and should be mapping “price to price” - so comparing apples for apples - rather than looking at aggregated prices and making assumptions/not noticing or adjusting for “product mix” that’s on the market. A nuanced point, which I hope makes sense!
The ONS in November sees London prices down 1.2%, and the North East up 6.8% - it runs high to low from the North, the Midlands, to the South. Or - cheapest regions to most expensive. London was the only region printing a negative. England’s average rent is now £1,424, up 3.9% on the year (or just above inflation). Wales’ - £822, up 5.7% as discussed. Scotland - £1,018. The ONS did reveal however that this is “new rents” in Scotland, although they did use in-tenancy rent increases from Sept 22 to March 25. As so often, this makes the ONS figures a lot less trustworthy……
The rent graph looks the same as the capital values graph, but shifted a couple of percentage points to the right. North East at 7.9%, as discussed - London’s 2.1% is well adrift of the next lowest which was the South East at 3.8%. Yields are still increasing basically everywhere as the market continues on its quest for adjustment and an element of balance; with all the noise out there, this seems unlikely.
No new trends to particularly draw from that - it’s more of the same, but it is good to have some colour around the actual numbers (for me, anyway!). On to the gilts and swaps.
This was the week where the markets jerked back from the $200bn in bond announcements from Mr Trump. His waves and kicking and screaming, his one-trick tariff pony, did what it has done throughout at points and what it did around “Liberation Day” 2025. Then he calmed down and that TACO trade - Trump Always Chickens Out - paid off again.
We lost this week, as borrowers, what we gained last week. Open for the week - 3.884% - close - 3.992%, mercurially staying below that 4%. There was a 10 basis point jump - really quite significant - on Thursday when Trump came out swinging. Volatility prevails, which it will while he’s in charge. Easy come, easy go? The longer bonds went from 5.212% to 5.273%, so at least the yield curve got a bit shallower as they only put on 6bp compared to the 11bp that the 5 year put on! Small mercies?
The swap held up on Thursday’s close, however, not changing much - around 7 bps on the week, closing at 3.657% - showing that the flex is really playing out in the discount to the gilt first, and then the sensitivity to the gilt yield second. Again - almost identical to one month ago, and comparing favourably to last January which was miserable for rates news and when the bond vigilantes had the wind behind them (that was a 3.993% print one year ago, so we are 35bps better off than then).
What filtered through to the retail punters, via the news? This means slower rates of cuts. The market's prediction for rates in one year’s time is now split between 3.25% and 3.5%, basically.
This week’s deep dive can’t ignore the changes (and semi-clarity, which is better than none at all which is where we were at) to the EPC legislation, which we’ve got to get stuck into. Is the Warm Homes Plan being received warmly here at Propenomix HQ? You’ll find out. The Bank of England talks about the impact that the changes to EPCs and the Government consultations on the matter have had thus far on mortgage rates, so that’s also in the crosshairs. Molior’s first report on resi development in London for 2026 was out and we took a look. Zoopla also produced a short report on homes in 2025, slipping out the news that “half of them increased in value” - so you know the 2 options that leaves for the other 50%.....
EPCs, then. Clarity, and a victory claimed by the NRLA here. Perhaps just a quick revision of where we were at - a cap at £15k needing to be spent to get a property to EPC C or above by 2028 for new tenancies and 2030 for existing. The 2028 pipedream has been shelved, and the cap is down to £10k, and 10% of the property’s value for properties under £100k. There’s one date - October 2030. Also, there was chatter that the EPC validity period would be reduced to 5 years - but that’s not the case. Any EPCs done before October 2029 will be valid for another 10 years. When does the (current, 2012 introduced) RdSAP calculation methodology get replaced by the HEM (Home Energy Model) - they still say 2026, but it is unclear when and how the old model gets phased out or whether it runs side by side. This is still a controversial bit, because it takes a dim view of Gas boilers aside from anything else - and - guess what - about 85% of homes still have a gas boiler. (10% electric, 4% Oil/LPG, under 2% heat pumps).
1.5 million new boilers are installed each year versus 65k or so heat pumps, to put that into context.
If they ignore those figures, there will be blood on the carpet.
Still - anyway. What did the Government say about the Warm Homes Plan? It only took 152 pages. Let’s get into it….into reporting mode:
The government's "Warm Homes Plan" has finally landed, and it is a beast of a document. It charts a course for the complete overhaul of the UK’s ageing housing stock - a mission that the current administration is framing as the central pillar of its quest to become a "clean energy superpower." While the headline figure of £15 billion in public investment is designed to grab attention, the devil - as always - is in the detail of how this money will be deployed and the regulatory teeth that will enforce the transition.
I have identified the four most significant pillars of this report: the massive financial injection into clean heat, the "rooftop revolution" of solar and storage, the tightening of the screw on the rental sector, and the creation of a new state-led delivery agency.
Theme 1: The £15 Billion Electrification Gambit
Summary: The Warm Homes Plan commits a record £15 billion in public investment over this Parliament to upgrade up to 5 million homes by 2030. This investment is part of a broader £38 billion total investment package designed to cut energy bills and tackle fuel poverty. Central to this is the expansion of the Boiler Upgrade Scheme (BUS), which receives £2.7 billion to provide universal grants of up to £7,500 for heat pump installations. The plan also introduces a new £5 billion Warm Homes Fund, which includes £1.7 billion for low (and zero) interest consumer loans to help homeowners meet the upfront costs of solar panels, batteries, and heat pumps. The government's analysis suggests that a typical household adopting a heat pump, solar PV, and a battery could save up to £550 a year on energy bills compared to a gas boiler.
Propenomix Perspective: I have seen many "landmark" energy plans in my time, but this one really has some fiscal weight behind it. The £15 billion is a serious chunk of change, and the shift toward low interest loans via the Warm Homes Fund is a pragmatic admission that the state cannot simply grant its way out of the efficiency crisis. They do mostly need to be zero interest because payback periods are what scuppered the “Green Deal” that you might remember, way back when. However, I am a natural skeptic when it comes to "typical" bill savings. The £550 saving figure relies on a "best case" scenario involving high-performing heat pumps and expensive battery storage. In the real world, the ROI for an owner occupier is heavily dependent on the current Gilt yields and the prevailing SONIA swap rates that lenders will use to price those "low-interest" loans. If the private sector doesn't play ball with the government's "Strategic Partnership," these loans won't be nearly as attractive as the press release suggests.
Theme 2: Unleashing the Rooftop Revolution
Summary: The government aims to triple the number of homes with solar panels by 2030, targeting an additional 3 million installations. This "rooftop revolution" is a core component of the plan to reach 45 - 47GW of solar capacity by the end of the decade. To support this, the plan integrates solar and battery storage into its capital investment programmes for low income households and offers the aforementioned low interest loans for owner occupiers. Furthermore, the plan emphasises the role of "consumer led flexibility," encouraging the use of home batteries and smart meters to shift demand to off peak periods. The government projects that households using a battery with a time of use tariff could save an additional £300 annually. To ensure new builds contribute, the Future Homes Standard will require solar panels as standard from 2026.
Propenomix Perspective: I actually like the focus on solar and storage. Labour loved this back in their last bite at Government and the Tories drove a truck through it for what seemed like political points scoring. The old FIT (Feed-in-tariff) system was OK, and just needed tweaking downwards. Energy security - not an issue in 2010, a big issue in 2022, for example, developed into a HUGE problem for the UK - and that’s not a net zero point of course. For years, the policy focus was obsessively on "fabric first" - insulation and windows - which is important but frankly boring for investors. Solar plus storage is where the "real" market is moving. By 2030, a home without a battery could be a stranded asset in the rental market. My concern here is the supply chain. The plan targets 180,000 new jobs, but we are currently facing a massive skills gap in MCS accredited installers. If you want to put 3 million solar arrays on roofs, you need a literal army of electricians. Without them, the "upfront cost" will be driven up by labour scarcity, regardless of how cheap the panels get. I suspect the "70% UK made" target for heat pumps is more political posturing than industrial reality. I’ll take the unders, thanks, Ed, if we are having a bet? As usual, the timeframe won’t happen - but the real savings and the leaps forward in battery tech since the last Labour administration are two very relevant factors - people will also remember the Great Energy Shock of 2022 for some time, and hedging against another one of those will make great sense to people. I do wonder how long it will be before overnight rates start to creep up because of the amount of takeup - Greg at Octopus probably has a great handle on this, but it might be commercially sensitive information because I can’t find it. Supply and demand, though, right?
Theme 3: The Rental Sector Squeeze
Summary: The Warm Homes Plan places a heavy emphasis on "standing up for renters" by introducing new Minimum Energy Efficiency Standards (MEES). Privately rented properties in England and Wales will be required to meet EPC Band C by October 2030. The government estimates that private renters make up over 36% of the fuel-poor population (versus 19% of the households) and often live in the least efficient housing (although this isn’t true when you look at the PRS versus owner-occupier stock, so I’m not sure on their source here). To help landlords comply, the plan keeps BUS grants available for the rental sector and highlights that these investments can be tax deductible as allowable expenses. Similar standards are being proposed for the social rented sector, supported by the Warm Homes Social Housing Fund. The government warns that these rules are essential to hitting the 2030 fuel poverty target.
Propenomix Perspective: This is the part that will make every BTL landlord in the country reach for the gin. EPC C by 2030 is a massive hurdle for the Victorian terrace stock that dominates the UK rental market. While the government mentions tax deductibility, that is cold comfort for a landlord facing a £10,000+ bill for external wall insulation and a heat pump. We are already seeing a "flight to quality" where investors are dumping older, inefficient stock to avoid these looming costs. This could lead to a further contraction in rental supply, pushing rents even higher. The "cost cap" mentioned in the report needs to be realistic - if it's too high, landlords will simply exit; if it's too low, the target becomes a fantasy.
Theme 4: The Warm Homes Agency and the Delivery Challenge
Summary: To oversee this massive transition, the government is establishing the Warm Homes Agency (WHA). This new public body will consolidate existing functions from the Department for Energy Security & Net Zero, Ofgem, and Salix into a single executive agency. The WHA’s mandate is to simplify the consumer journey, provide impartial advice, and coordinate delivery at a local level in partnership with mayors and local authorities. It will also overhaul the consumer protection regime to ensure high quality installations, following a National Audit Office review that found unacceptably high levels of non compliance in previous schemes. The agency will also work with Distribution Network Operators (DNOs) to ensure the local grids can handle the increased load from millions of new heat pumps and EV chargers.
Propenomix Perspective: A quango? Who’d have thought it? Consolidation SHOULD make sense and mean more efficiency, but this is the public sector. I have a general rule: when the government creates a new agency to "simplify" things, it usually adds another layer of bureaucracy. However, consolidating the mess of Salix, Ofgem, and various DESNZ departments is a necessary evil. The real test for the WHA will be its interaction with the DNOs. Our local grids are currently the biggest bottleneck in the entire property market - I know developers who have been quoted three year wait times for a simple substation upgrade. If the WHA doesn't have the teeth to force DNOs to "proactively unloop" properties and upgrade local transformers, the whole plan will grind to a halt in the first suburban cul-de-sac it hits. It’s a bold vision, but delivery is everything.
My most important takeaway - look out for the period when you can ensure your EPC C IS a C on an existing property - when we have a timeline for the HEM phasing in and the RdSAP phasing out, be careful, because some industry analysis predicts that 15-20% of Cs will drop back to a D or even worse. This usually happens when a methodology of energy efficiency changes - the “subtle nudge” upwards, potentially influenced by tax or mortgage rates or insurance, as we have discussed many times before. This could work and sounds good on paper, especially in a Government writeup - you can tell I’m still sceptical.
Bonus points - let’s not look past the fact that 1-Oct-29 (the deadline for the “old EPC” C to still last 10 years, although we aren’t clear what will happen after that, as things are still in consultation) is into the next parliament. Let alone 1-Oct-30. If the current poll leaders win the next election or get traction in a right-wing coalition, then this will all be out of the window. So what? What should I do? Spend money sensibly at this time, and make the most of the new grant schemes when we get the formal detail - chucking your 10ks in early on is not the dominant strategy here. Check carefully how fabric improvements (like windows) will impact on the 10k cap. You must always seek to add value of course. Most of all - having been through a 7-figure grant funded programme of improvements - look after the tenants and make sure the installers do too - because they move on these jobs at a rate of knots and leave far too much mess behind aside from anything else. Collaborate, don’t fight - but gently point out that these upgrades need to be done otherwise this won’t be a viable rental property in a few years’ time, and no-one wants that on either end (usually!).
Moving on with the Bank of England report - the irresistibly titled “Product Innovation in the UK mortgage market: the case of green mortgages”:-
Theme 1: The Emergence of the Green Discount
Summary
A new Staff Working Paper from the Bank of England provides the first empirical confirmation that "green" attributes are being systematically priced into UK mortgage contracts. By analysing millions of transaction-level records alongside Energy Performance Certificates (EPCs), the researchers found that energy efficiency became a statistically significant pricing factor starting in 2018. This timing coincides with the introduction of the Minimum Energy Efficiency Standards (MEES), suggesting a direct link between regulatory policy and product innovation.
The data reveals that lenders began offering discounts averaging 7.5 basis points (bps) for properties with an EPC rating of A or B. This spread is not static; it responds dynamically to macroeconomic shocks. For instance, following the energy price surge in 2022, the green discount widened significantly to approximately 15 basis points. The findings suggest that banks are treating energy efficiency as a genuine risk factor, offering cheaper capital to borrowers who purchase homes that are insulated from utility price volatility.
The Propenomix Perspective
Let's strip away the academic politeness for a moment. The headlines will scream that banks are paying you to go green, but we need to look at the actual numbers. A 7.5 basis point discount on a standard mortgage is, frankly, a rounding error. On a £200,000 loan, we are talking about saving roughly £150 a year. That is barely enough to cover a decent dinner out, let alone incentivise a homeowner to spend £20,000 on external wall insulation and a heat pump.
What is really interesting here is the timing. The banks didn't move a muscle when the Paris Agreement was signed in 2015. They only started pricing this in when the government threatened landlords with MEES in 2018 and when gas prices went through the roof in 2022. This isn't altruism; it is risk management dressed up as marketing. The market is pricing in the fact that if you live in a draughty Victorian terrace and gas hits nearly £2 a therm again, you are more likely to default than the person in the airtight new build next door. It is a credit risk adjustment, plain and simple - and a pretty stingy one at that.
Theme 2: The New Build Bias
Summary
One of the most striking findings in the report is the skewed distribution of green mortgage lending. The analysis shows that green mortgages - those offering specific pricing advantages for energy efficiency - are overwhelmingly concentrated in the new build sector. Specifically, 68% of mortgages issued against properties with a "green" characteristic (EPC A or B) were for new builds, whereas only 3% of standard mortgages financed new construction. Conversely, 97% of standard lending flows into existing stock.
The authors argue that this acts as a mechanism to relax credit constraints for developers and buyers of new homes. By offering cheaper financing costs for the highest-rated properties, lenders effectively make marginal development projects financially viable. This suggests that the primary economic impact of green mortgage innovation in the UK has been to stimulate the construction of new housing supply rather than to encourage the retrofitting of the country's aging existing housing stock.
The Propenomix Perspective
This confirms what I have suspected for a long time: "Green Mortgage" is largely just a rebrand for "New Build Mortgage". If you are buying a shiny new box from a volume housebuilder, you automatically qualify for the cheaper rate because modern building regs force the EPC to be an A or a B. If you are buying a character property that actually needs retrofitting, you are left out in the cold - literally and financially.
The authors claim this stimulates construction, and perhaps on the margins it does help developers shift units. But for the wider property market, this is a distortion. It creates a two-tier financing system where the assets that need the most investment (older stock) are the most expensive to finance. We are essentially subsidising the easy wins. If the government and the banks were serious about decarbonisation, they would flip this on its head and offer the 15 basis point discount to the person improving a D-rated property to a C, rather than the person buying a turnkey new build that was going to be built anyway. Show me the incentive, and I will show you the outcome, as a great man once said.
Theme 3: The Regulatory "Club"
Summary
The report delves into the "extensive margin" of product innovation - essentially asking which banks are bothering to offer these green products. The data indicates a clear divide: innovation is concentrated heavily among large, systemically important institutions and publicly listed banks. These are the lenders subject to the most intense scrutiny from the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), as well as pressure from shareholders regarding ESG commitments.
Smaller, non-systemic lenders have been much slower to adopt these pricing structures. The authors propose a "pressure channel," suggesting that for big banks, offering green discounts is a strategic move to manage regulatory expectations and signal compliance. By proactively pricing green attributes, these large institutions effectively lower their own cost of capital and pre-empt potentially costlier regulatory interventions down the line.
The Propenomix Perspective
This is the "tick-box" economy in action. The big boys - the Lloyds, Barclays, and NatWests of the world - have armies of compliance officers and ESG committees. For them, shaving a few basis points off a mortgage rate is a cheap way to produce a glossy sustainability report and keep the regulators off their backs. It is a marketing expense.
The smaller challenger banks and building societies, who often offer the most competitive standard rates, aren't playing this game because they don't have the same gun to their heads. They are looking at the raw swap rates and credit spreads and deciding that the "greenium" just isn't there yet. It tells you that this market isn't being driven by consumer demand; it is being driven by the Prudential Regulation Authority and the optics of being a "responsible lender". Until the capital markets start genuinely pricing green collateral differently - giving banks cheaper wholesale funding for green loan books - this will remain a game for the big listed players looking to polish their ESG credentials.
Molior’s Jan 2026 efforts then, on residential development in London:
Theme 1: The Construction Cliff Edge
Summary: The latest data from Molior paints a stark picture of London’s residential development sector entering 2026. The headline figure is undeniable: private construction starts have collapsed by 84% over the last decade. In 2015, developers commenced work on 33,782 private homes; in 2025, that figure plummeted to just 5,547. While the final quarter of 2025 showed a slight uptick with 2,294 starts - an improvement on the dismal 882 recorded in Q2 - the aggregate trend remains overwhelmingly negative.
Compounding this issue is the prevalence of "zombie" sites. At the end of Q4 2025, construction had effectively halted on 5,009 homes across 51 separate development sites. Molior notes that these sites are typically padlocked because the main contractor has gone insolvent due to rising costs, or because the developer has deliberately paused work in the face of a weak sales market.
The Propenomix Perspective
Let’s be clear about what we are looking at here. This isn’t a "softening" or a "correction" - it is a full-blown capitulation of supply. When you see an 84% drop in starts over a decade, you aren't looking at a cyclical dip; you are looking at a broken transmission mechanism. The capital has effectively stopped building private housing.
The halted sites statistic is particularly nasty. A padlock on the gate usually means the contractor has gone bust, and in this inflationary environment, replacing them costs significantly more than the original contract sum. That destroys the gross development value (GDV) instantly. I have been warning about this for years: the toxic cocktail of spiked material costs, labour shortages, and the cost of debt - thank you, unyielding SONIA rates - has made building in London a fool's errand for all but the most capital-rich players. If you are holding land and hoping for a contractor to miraculously lower their price, you are dreaming. This is the supply crunch we predicted, and it is going to put a rocket under rents and, eventually, values - simply because there will be nothing new to buy.
Theme 2: The Fantasy of Government Targets
Summary: The disparity between political ambition and market reality has never been wider. The government has set a target requiring 22,000 starts per quarter to meet housing needs. Against this, the actual pipeline is failing spectacularly. Molior’s analysis of the 37,388 private homes currently under construction reveals a massive shortfall against the government's two-year London target.
Specifically, the "completions shortfall" stands at 161,947 homes, representing a 92% failure rate against the target. The report bluntly states that "government targets are impossible to achieve". Looking ahead to 2027 and beyond, the forecast supply is a meagre 14,053 homes - a tiny fraction (just 8%) of the 176,000-home target set by policymakers.
The Propenomix Perspective
I have to laugh, or I’d cry. A 92% shortfall. In any other industry, if you missed your KPI by 92%, you wouldn't just be fired; you’d be investigated for fraud. Yet in UK housing policy, this is just another Sunday.
We need to stop treating these government targets as serious metrics. They are not. They are political wish-lists detached from economic reality. You cannot regulate supply into existence when the viability equation is broken. The planners demand affordable percentages that don't stack up, the tax regime punishes the investors who fund the early stages, and the cost of finance remains punitive. The result? A completion forecast for 2027 that looks like a rounding error.
This is the macro-reality: the government is shouting for 22,000 homes a quarter, and the market is delivering less than 3,000. The gap between rhetoric and reality is now a canyon. For the savvy investor, this screams "scarcity." If you own a quality asset in London, hold onto it with both hands. The cavalry isn't coming.
Theme 3: The Death of the SME and the Rise of Oligopoly
Summary: The Molior report identifies a structural shift in the London development landscape, suggesting the market is moving towards a "Natural Oligopoly". The barriers to entry for new or smaller developers have become insurmountable. These barriers include elongated timelines that require a "patient balance sheet" and expensive construction methods that heavily favour economies of scale.
Furthermore, scarce customers are increasingly demanding a proven track record and expertise across every sales channel, which smaller entities often lack. The report concludes that these factors are actively excluding smaller developers from the industry. The result will be a consolidated group of larger developers operating with "limited competition from 2027".
The Propenomix Perspective
This is the "Amazon-ification" of London property. The days of the plucky SME developer buying a zone 3 plot, getting a cheeky planning uplift, and knocking out 40 units for a tidy profit are over. Dead. Buried.
The cost of capital and the sheer duration of the planning process - dragging on for years while your bridge loan ticks away at 10% plus - means you need a balance sheet that can bleed cash for 36 months without panic. Only the PLCs and the sovereign-backed giants can do that.
What does this mean for us? It means the product reaching the market from 2027 onwards will be homogeneous, priced by a cartel of survivors, and likely drip-fed to maintain pricing power. The "limited competition" Molior predicts is effectively a licence to print money for the big boys who survive this cull. If you are a small developer, pivot or partner up. If you are an investor, look at who is actually building. The list is getting shorter by the day.
Theme 4: The Sales Vacuum and the Mid-Market Trap
Summary: Sales volumes have tracked the decline in construction, falling 68% over the last decade. In 2025, just 8,436 new homes were sold across the entire capital. The breakdown of these sales highlights a "striking" pattern: individual buyers (both UK and overseas) accounted for only 1,014 sales in Q4, generally at higher price points, while bulk deals and switches to affordable housing accounted for the volume at lower price points.
A specific area of concern is the inventory overhang in the mid-to-high market. There is a large "dark-blue segment" of unsold stock priced between £1,000 and £1,500 per square foot. The report notes that 4,247 homes in this price bracket are unsold (combining those completing in 2026 and later), yet Q4 2025 saw just 150 sales in this specific band.
The Propenomix Perspective
This is the data point that should make you sit up and pay attention. We have a "barbell" market. At the bottom end (sub-£800 psf), the stock is being mopped up by Build-to-Rent funds and Housing Associations because the yield - just about - works, or the developer is desperate to exit. At the very top end (super-prime), the money is immune to mortgage rates.
But the middle? The £1,000 - £1,500 psf bracket? That is the kill zone. That is where the upper-middle-class professional or the small-scale investor used to buy. They have been wiped out by interest rates and tax changes. Selling 150 units in a quarter against an overhang of 4,000+ is catastrophic. That is decades of inventory at the current absorption rate.
If you are holding stock in that "premium but not prime" bracket, particularly in zones where the international bid has dried up, you are in trouble. We are likely to see aggressive incentives, bulk disposals, or - as noted in Theme 1 - sites simply being mothballed until the world changes. The "normal" UK buyer is absent, and until rates come down significantly, that £1,200 psf flat in a tower is going to sit empty.
Zoopla brings up the rear with their alternative analysis snapshot for 2025 - half of homes increasing in value, with them trying to sound as hopeful as possible…..
Theme 1: The Great Regional Decoupling
Summary: The 2025 housing market data from Zoopla reveals a stark "regional hierarchy" rather than a uniform national picture. While 50% of UK homes increased in value, the distribution of these gains is heavily skewed towards the North. Northern Ireland emerged as the standout performer, with a staggering 94% of homes registering an increase in value, averaging a gain of £14,200. This momentum extended to Scotland and the North West, which together accounted for the entire top 10 list of local authorities with the highest proportion of rising values. Renfrewshire in Scotland took the top spot with 95% of homes rising, followed closely by Glasgow (90%) and Chorley (88%). In contrast, the market in Southern England has cooled significantly, with Northern regions seeing more than 70% of homeowners recording gains, compared to much lower confidence in the South.
The Propenomix Perspective
This dataset is the final nail in the coffin for the concept of a single "UK Property Market". It simply does not exist. What we are seeing here is the inevitable arithmetic of yield seeking and affordability ceilings. The North is booming not because of some sudden cultural renaissance, but because the numbers still stack up - just about. When you have Northern Ireland delivering 94% positive growth, it tells you that capital is fleeing the stagnant, yield-compressed South in search of anywhere that offers a return on equity that beats a standard savings account.
The dominance of the North West and Scotland in the top ten list is a signal that the "ripple effect" - the historic tendency for wealth to flow out from London - has officially turned into a flood. However, let's not get too misty-eyed. A "boom" in Renfrewshire or Chorley is often just a correction to the mean after years of stagnation. The smart money isn't just chasing growth; it is fleeing the crushing debt-servicing costs of the South. If you are leveraged in London, you are bleeding; if you are leveraged in Glasgow, you might just be breaking even (or even making a profit, whisper it!).
Theme 2: The Southern Supply Overhang
Summary: The data paints a challenging picture for Southern England, where the market is adjusting to "price sensitive demand" and a surplus of inventory. Approximately six in ten of all homes that registered a decline in value during 2025 were located in southern regions. In these areas, only 35% of homes saw their value increase, a sharp contrast to the figures seen in the North. The report cites a "dual impact" of affordability challenges driven by high base prices and a significant increase in the choice of homes for sale, which has reinforced a "buyers market" dynamic. Specific areas have been hit harder than others; for instance, in London's Kensington and Chelsea, seven out of ten homes recorded a decrease in value. Similarly, coastal towns/areas like Torbay and Hastings saw price drops in 79% and 78% of homes respectively.
The Propenomix Perspective
"Price sensitive demand" is a polite euphemism for "nobody can afford the mortgage payments." The South is suffering from a massive hangover after a decade of cheap credit benders. When base rates were near zero, a £500,000 mortgage in the South East was manageable. At current rates, that same debt pile is a monthly financial emergency. The result is exactly what I have been warning about: a liquidity trap where sellers are staring at valuations from 2022 and buyers are staring at affordability calculators from 2026.
The fact that supply is rising - creating this so-called "buyers market" - is the real story here. It suggests that the holding power of Southern owners is cracking. People aren't just selling because they want to move; they are selling because the cost of capital has finally outpaced their ability to pretend everything is fine. The stat about Kensington and Chelsea is particularly telling. Prime London is usually the first to recover, but here it is lagging. That suggests this isn't just a blip - it is a fundamental repricing of asset values in areas where yields have been detached from reality for far too long. “Choose life” as Renton might say. A further irony here is that there’s a significant argument for renting rather than owning while prices are going down (I myself rented in 2008, waiting for the market to adjust, and bought a house 29% below its 2008 asking price - and thought I was the cleverest person in the world, of course - in May 2009). Argument for renting in London - strong - amount of stock - dwindling - ergo, still lots of demand and pressure on rents too. No real answers there, for new entrants to that market.
Theme 3: The Flight to Usable Space
Summary: The disparity in performance was not just regional but also structural, with clear winners and losers in terms of property type. Terraced and semi-detached homes proved the most resilient to market pressures in 2025, with 56% of these properties seeing consistent value increases across the country. Conversely, the market for flats has faced significant headwinds. Flats were the property type most likely to experience value losses, with 50% of them seeing their value fall by 1% or more over the course of the year. Additionally, properties valued over £1m faced greater pressure, aligning with the broader trend of weakness in high-value southern markets. The data indicates a continued preference among buyers for the attributes typically associated with houses rather than apartments.
The Propenomix Perspective
The death of the flat market has been predicted and indeed commented on many times by me, but 50% of stock falling in value more than 1% is a brutal statistic. This isn't just about the "race for space" or the post-pandemic desire for a garden office. This is about the toxic combination of service charge inflation and the ongoing leasehold scandal. Buyers are increasingly savvy - they look at a flat and see a liability, not an asset. They see uncapped management fees, sinking funds that act like black holes, and the nightmare of communal repairs. Solicitors are righting the wrongs of years gone by by doing a better job of highlighting these drawbacks - and therefore putting buyers off.
Meanwhile, the humble terrace and semi-detached house continue to be the workhorses of the British property economy. They offer freehold control (usually) and no permission slips needed to change the front door. The weakness in the £1m+ bracket is also consistent with the cost-of-capital argument. High-value assets are sensitive to interest rates. When money costs 5%, a £1m asset needs to work hard to justify its existence. A flashy two-bed flat in a high-rise with a gym nobody uses and a concierge who is never there simply doesn't make the cut anymore.
Theme 4: The Fallacy of the "National Average"
Summary: While the headline might read that "half of homes increased in value," the underlying numbers suggest a market that is largely treading water. Across the UK's 30 million homes, the average overall price change was a modest increase of just £2,300. While 15.2 million homes saw gains averaging £9,900, a significant 9.1 million homes lost value, with an average loss of £10,800. A further 5.6 million homes remained broadly static, fluctuating within a +/- 1% range. Zoopla describes the current environment as one where the market is adjusting to higher mortgage rates, leading to "choppier and complex market conditions," particularly in the South.
The Propenomix Perspective
If you ever needed proof that "average" is a dangerous word, this is it. A national average rise of £2,300 is, in real terms, a massive crash. When you factor in inflation - even at modest levels - a £2,300 nominal gain on a £250,000 asset is a loss in purchasing power. We are looking at a market where well over half the stock is either losing nominal value or stagnating - and that’s been the case since late 2022. What happened then, again, of note? #neverforget
The headline "Half of homes increased in value" is technically true but spiritually dishonest. It masks the violent rotation of capital occurring beneath the surface. The "choppier" conditions mentioned are essentially the market trying to find a clearing price in a world where free money is gone. For investors, this is the most dangerous phase. If you are sitting on a portfolio thinking "property always goes up," you are looking at the wrong column. The reality is a bifurcated market: a nominal boom in the cheap seats (North) and a real-term correction in the premium seats (South). Ignore the averages - look at the spreads. We already know capital growth isn’t coming to save you in 2026 - I’m still long-term bullish but remember Keynes also said - in the long run, we are all dead.
So - on the back of an amazing Property Business Workshop this week in London, tickets for the next one are now live. Firstly - after much demand and many DMs, we go where the action is at the moment - Manchester! This is a workshop in huge demand, as we talk about exits. We cover tax, risk, deal structuring and exit options - not just for you, but for those who you will inevitably be dealing with to buy assets, portfolios, companies and the likes from. Can you help with their exit? I have, over the years, often because they have no real formal plan of their own - and added massive value, getting deals over the line.
As always we have real life case studies about our own experiences, and close with our “no-holds-barred” Q+A. Anything individual to consider? Get a VIP ticket and join us for dinner, in a smaller setting with an opportunity to discuss any specific roadblocks or issues in your property business at the moment. Our VIP dinner was absolutely incredible this week, and got some superb feedback - the upgrade is well worth it. Book your SUPER EARLY BIRD tickets for Wednesday 22nd April, Central Manchester at: https://bit.ly/pbwten10
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.