"There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen." - Frédéric Bastiat
This week's quote pertains to the deep dive, as ever - four reports that, read together, are a 176-year-late vindication of a French economist most politicians have never heard of. The seen: tenant protections passed, council tax premiums collected, shiny Build-to-Rent towers completed. The unseen: landlords on a conveyor belt to the exit, SME builders paying tax on homes nobody lives in, and BTR construction starts down 29% in the one city where the model actually scaled. Bastiat wrote the essay in 1850. We're still failing the test.
As we charge headlong through the biggest change in housing law in 38 years, our next Property Business Workshop is live and tickets are moving quickly. This is about due diligence - and REAL due diligence - performed on you by lenders and prospective investors, as well as what you should be doing on potential business partners and - most importantly - property deals. The live DD exercise - how I do it, no stone unturned - has even had predictive value in past workshops in terms of which smoke-sellers to avoid. In this market, with withdrawal rates where they are and the pricing gap where it is (read on), DD has never been worth more per hour invested. Book in on the next Property Business Workshop with myself and Rod Turner - Wednesday 1st July - Central London - www.tinyurl.com/pbweleven
Welcome back to Trumpwatch. If recent weeks were about the legal demolition of the tariff programme, this week was about watching the White House do what it always does after a courtroom defeat - find another door. And this time, the UK is standing directly in front of it.
The mechanism, since the Supreme Court blocked the sweeping IEEPA tariffs, is a Section 301 "forced labour" investigation - a backdoor through which the administration is proposing 10% to 12.5% duties on dozens of trading partners. Squarely caught in the crosshairs: us. Yes, the country with the Modern Slavery Act 2015, being investigated for forced labour exposure. You couldn't write it - although someone in the US Trade Representative's office clearly could, and did. The Department for Business and Trade is pushing back by citing exactly that Act, while simultaneously scrambling to assemble a multi-nation "anti-tariff alliance" with the EU and the CPTPP countries to block further escalation. Is an anti-tariff alliance a sensible idea? In principle, collective bargaining beats individual supplication - I've been saying for years that the UK plays this game like a minnow when it doesn't have to. In practice, herding the EU and the CPTPD'oh - CPTPP - into a unified position before late July is a tall order. We'll see. I'm not convinced the alliance materialises in time to matter, but the attempt itself at least signals a pulse.
Then we get to the genuinely remarkable bit. The "Special Relationship" is now at what historians may come to record as a low watermark. Trump publicly admitted that his earlier demands for UK base access during the Iran conflict were a loyalty test - one which Downing Street's hesitation failed. The alliance, in his words, is "not like it used to be." Standard Fare, in one sense - the man communicates in tests, scores and rankings. But there's something more consequential underneath: when the relationship's value is openly downgraded by the White House at the same time as a tariff schedule is being drawn up, those two things are not unconnected. Compounding it all, Trump spent the week openly praising France (of all people - the historians really will enjoy this period) and issued Number 10 an ultimatum: relations recover when, and only when, the UK mirrors Washington's hardline stance on immigration. So the price list is published. Whether any UK government - this one, or whichever one emerges from the current Labour psychodrama - is willing to pay it is another matter entirely.
And we should talk about that psychodrama, because the bond market certainly is. Andy Burnham confirmed - for the first time, openly - that he intends to challenge Keir Starmer for the leadership, with everything hinging on the Makerfield by-election on June 18th to get him a seat in the Commons. In other news sources carrying news with a similar element of surprise, the Pope came out as Catholic, and there were other confirmations that Elvis is sadly no longer with us, and that the Moon Landing was real. Starmer says he isn't going anywhere. Roughly 100 Labour MPs appear to disagree. I'm not trying to ascribe blame in any direction here - leadership uncertainty is simply a risk premium, whoever wears it - but gilt traders have been moving on Burnham's odds for a fortnight now, and they moved again this week.
Why does all this matter to your portfolio in Birmingham or Leeds? Because the transmission is direct and quick. The Iran conflict - where, this week, Tehran was reportedly drafting its own amendments to the proposed deal rather than accepting Washington's terms - sets the oil price, the oil price sets the inflation expectation, and the inflation expectation sets the gilt yield that prices your next refinance. On Friday a hot US jobs number (172k against 85k expected) had markets fully pricing a Fed HIKE by year-end, and UK yields were dragged along in the slipstream within hours. More on the precise numbers when we get to the gilts. The loyalty test we keep passing, sadly, is the one where US Treasuries sneeze and we catch the cold.
Phew - stepping away from the transatlantic theatre, back we go to the comparative safety of the UK real-time property market…
As is customary, Chris Watkin has been relentlessly crunching the portal numbers and then publishing them at Property Industry Eye. His analysis for Week 21 of 2026 - the week ending 31st May - is where it is at, as always. If you want to know how the macroeconomic gridlock translates to the local high street, and the REAL property market on the ground, look no further.
One important health warning before the numbers, which Chris rightly flags: Week 21 was the late May Bank Holiday week, so activity across most metrics ran around 20% lower than normal thanks to the shorter working week. Compare with caution. Underneath the seasonal dip, though, the story is "broadly steady" - no significant shifts in the underlying trends, which in this market counts as news in itself.
Supply first. 31.3k new listings this week, down from 39.6k last week - that's the Bank Holiday doing its thing, against a 2026 weekly average of 37.6k and a 10-year Week 21 average of 34.5k. The year-to-date pipeline now sits at 783k new listings - 0.6% ahead of 2025 (779k), 5.1% ahead of 2024, and 14.1% higher than the 2017-19 pre-Covid average of 687k. My long-running "10% more stock than a normal market" ready reckoner remains broken to the upside - 14% is the truth of it on the supply side this year. The enthusiasm to sell simply has not faded, and I can't put all of it past continued landlord disposal, although as I say most weeks - that doesn't automatically mean fewer rentals, it means we should make sensible assumptions that it leans that way.
But are they selling? The £64k question, every single week at the moment. Gross sales printed 22.1k homes sold STC for the week (27.2k last week) against a 10-year Week 21 average of 25.3k - again, Bank Holiday adjusted, that's respectable rather than alarming. The YTD picture is the one to watch: 521k gross sales, which is 5.6% BELOW 2025's 552k (please remember the stamp duty holiday, although we’ve also now had 2 months AFTER that deadline, so it should be nearly ironed out at this point); we are still 1.7% ahead of 2024 and 9.6% above the pre-Covid norm. So 2026 is selling fewer homes than 2025 did, from a bigger shelf of stock. What does that mean? The market is functional but congested - and the friction is showing up exactly where you'd expect.
Exhibit A: the pricing gap. The difference between the average listing asking price (£447k) and the asking price of homes that actually go sold STC (£368k) is 21.5%, against a long-term average of 16% to 17%. Not quite the intergalactic 27%+ we saw earlier in the spring, but still a chasm - and still, in my view, substantially manufactured by agents buying instructions with valuations that belong in a different rate environment. Exhibit B: the withdrawal rate. 46.1% of all homes that left UK estate agents' books in May went unsold. Nearly half. Chris has been banging this drum for years - the long sole-agency contract protects the agent, not the seller, while the "salami style" reductions do their slow work. Chris believes it should be regulated against, and that 8 weeks should be the maximum contract length. I’d support it (to an extent - overregulating I’m not a big fan of) - but he is trying to do the right thing by the vendor here. I have MUCH more confidence in an agent that signs a contract with no tie-in than any other agent. The reductions are relentless: 21k price cuts this week on a 747k-home shelf, with 13.4% of all UK homes for sale reduced in May against a long-term average of 10.7%.
The probability-of-selling stat rounds it out: only 53.9% of homes leaving agents' books in May exchanged and completed (7-year average 57.6%, and that includes the silly post-lockdown period). The fall-through rate, at least, is behaving - 21.5% against a decade average of 24.5%, and just 5.1% of the sold-STC pipeline fell through in April, below both the 2025 average and the 10-year norm. Buyers who commit are completing. The pipeline stood at 461k homes sold STC on 1st May, slightly ahead of 12 months ago (447k) - so the machine is working, it's just working hard for modest output.
The £/sq.ft data - which matches the Land Registry index with 98% accuracy five months in advance, which is exactly why we watch it - showed May's agreed sales averaging £349.64 per square foot, 1.9% higher than 12 months ago and 13.2% above five years ago. Sideways-to-gently-up in nominal terms; falling in real terms with inflation where it is. Affordability is quietly improving. Don't tell the mainstream media - there's no ragebait in that sentence, after all. We are getting to the time of year where that starts to suggest that that might be the percentage increase in the housing market this year. Guess who predicted 2%, by the way (I may end up being right for the wrong reasons) - don’t worry, I’ll be sure not to say I told you so. That’s a lie…….
On the rental side: the Week 21 average rent printed £1,818 pcm, with May 2026 averaging £1,785 against £1,779 in May 2025. Let me say that again - rents are up 0.3% year on year. Remember this is ASKING rents. After the years we've had, that is remarkable, and it says something about tenant affordability ceilings that I suspect the Deep Dive will reinforce shortly. Rental stock available sits at 305k, down from 311k a year ago - tighter, but not yet the cliff-edge some predicted post-Renters' Rights Act. We'll see. The data will tell us before the headlines do.
Chris - this is my weekly appreciation paragraph. Thanks for what you do! If you want some help positioning yourself as a local market expert - as an estate agent or any form of property professional - give Chris a shout! Either way give his channel www.youtube.com/@christopherwatkin a follow and some love, please!
Dust off the Macroscope, then. A proper four-course week. House prices - Nationwide AND Halifax in the same seven days, a rare double-header, with Zoopla and a Savills forecast revision as the side dishes. The Bank of England's Money and Credit report - an old friend of this section, and this month it comes with a sting in the detail. The final PMIs, including construction - winners without a doubt, and one reading I genuinely had to double-check before writing it down. Bringing up the rear, the contract states that we have to talk about the gilts and swaps, and will do so for many years to come, I'm sure.
House Prices - the double-header. Nationwide first. Annual UK house price growth of 1.7% in the year to May, down from 3.0% in April - and the mechanism behind that deceleration was a 0.6% seasonally-adjusted monthly FALL, the first monthly decline of 2026 on their index. One month is one month, and I always caution against reading too much into a single print - we don't make decisions on one month's data around here - but the direction of travel matters when it arrives in the same week as everything else below.
Halifax, meanwhile, came in at +0.5% annually, actually a whisker UP from April's 0.4%, with a -0.1% monthly move. So we have one index decelerating from 3% and another index accelerating from nothing, in the same month, for the same country. What does that tell us? Mostly that mix effects and methodology do a lot of heavy lifting at growth rates this close to zero - Nationwide and Halifax each measure their own mortgage book at approval stage, and when the cheaper stock is doing a disproportionate share of the selling (a divergence I flagged back in February and which hasn't gone away), the averages wobble. This is exactly why Chris's £/sq.ft figure - May at £349.64, up 1.9% year on year, matching the Land Registry five months ahead with 98% accuracy - is the tiebreaker I trust. Call the true national number "1-2% nominal" and you won't be far wrong.
The regional detail is where the story actually lives, though. Northern Ireland is still leading the UK at +7.8%. The South East DOWN 2.1% and London down 1.5%. The North-South divergence I've been describing for years isn't a forecast any more - it's the print, month after month, and it's a simple affordability arbitrage: money flows to where the rent covers the mortgage when it comes to investment property. Zoopla's April reading (+1.5% annually) adds useful texture on the demand side: sales agreed running 1% ahead of last year DESPITE buyer demand being down 10%, with committed home movers doing the heavy lifting. First-time buyer enquiries are down 6% - and tellingly, those who ARE active are targeting homes worth £10,000 more than last year. Fewer buyers, better-armed. That's what a 4.92% two-year fix does to a market: it doesn't kill demand, it filters it.
And for the forecasting pedants, like me: Savills revised their 2026 house price forecast this week from +2% to -2%. A four-point swing barely five months into the year is quite the haircut - although given what's happened to rate expectations since January (hold that thought for the gilts), can we blame them? Not really. The honest answer is that nobody's January forecast survived contact with the Strait of Hormuz. Now do the real-terms maths, because nominal is for headlines: -2% nominal with inflation north of 3% is a 5%-ish real-terms reduction, on top of the real-terms falls already banked since 2022. By that measure, in large parts of the Midlands and North, quality stock is as cheap in real terms as it has been for the best part of two decades. Grim if you're selling. If you're buying for yield and holding for the long term? That's not a tragedy, that's a shopping window - and the shop is currently displaying 747,000 items. They are wrong, though - and having praised Lucian Cook and the team more than I have any of the other forecasters over recent years - the most charitable thing I can say here is that that revision has been made by someone who struggles to look outside of the M25 for what’s happening in the whole of the UK, not just the 14% of households in the UK that are within the London Orbital (out of interest, if you had nothing but houses inside the M25, you could fit every single UK household in there by floor area, and have about 13 square miles to spare. Might be a bit crowded, mind).
The Money and Credit Report. We've analysed this one many times in the Supplement, and April's edition is a curious beast - resilient on the surface, with a pricing time-bomb ticking quietly underneath.
The surface first. Mortgage approvals for house purchase came in at 65,945 - up 3.1% on the month and 9.0% on the year, and comfortably back into the territory we'd associate with a functioning (if unspectacular) market. 65k is my number, and I’ve said it consistently over recent months and years. Tick. Remortgage approvals were 46% higher than a year ago - which tells you exactly where the 2021-vintage five-year fixes are landing, right on schedule, many of them written at rates with a 1 or a 2 in front. HMRC's transaction data backs the picture up: 101,030 residential transactions completed in April, down 2.8% on the month but 53% higher than last year - although let's be honest about that comparison, April 2025 was the post-stamp-duty-holiday crater, so the annual figure flatters everyone involved. Standard Fare from the base-effect factory that will be a distant memory (on SDLT) relatively soon.
Now the detail that matters. The average QUOTED rate on a two-year fix at 75% LTV fell from 5.14% in April to 4.92% in May. Back below 5% - hooray? Well. In January that same product was 3.93%. The quoted price of mortgage money has risen a full percentage point inside five months, courtesy of the Iran conflict and the wholesale repricing of Bank Rate expectations - and yet the EFFECTIVE rate on new advances, what borrowers actually completed at, was just 4.08% in April, up only marginally from 4.04%. The average rate on the outstanding stock of all mortgages? Still 3.93%. So we have a three-tier market: the back book at 3.93%, this month's completions at 4.08%, and the front window at 4.92%. The pig is still in the python. Approvals completing today were priced in the gentler world of February and March; the pipeline being priced TODAY meets the full force of current swaps. Neal Hudson at BuiltPlace made exactly this point in his chart of the week, and I think he's right - the question isn't whether higher quoted rates feed through to effective rates, it's when, and the answer would seem to be "a couple more months", which lands the squeeze squarely on the autumn selling season and the autumn remortgage cohort. Be on your toes (or, keep your eyes open for the bargains…..).
The supporting cast confirms the cooling. UK Finance's Household Finance Review puts the provisional value of mortgage lending in 2026 through May around 7% below the same period of 2025, noting that affordability eased a little in Q1 "but" - their but, and mine - the conflict's impact is yet to feed through. The IMLA intermediary tracker shows decisions-in-principle stable but conversion slipping: of 26 DIPs, only 10 now make it to completion. And in the later-life corner, 36,050 new loans to older borrowers in Q1, down 4.8% year on year, with lifetime mortgages down 8%. None of this is a crisis. All of it is a market doing less, at higher prices, with the worst of the repricing still in the post. Where do we want approvals to be? 70k-plus in a really healthy market. We're at 66k and the cost of money is going the wrong way. Onwards.
Onto the PMIs, my darlings of the real time economy. Winners without a doubt this month - manufacturing, comprehensively, almost suspiciously so. The final May reading printed 53.9, revised up from the flash 53.7 and nudging past April's 53.7 - the strongest expansion since May 2022. Output at a three-month high, led by intermediate and investment goods. New orders up for a sixth consecutive month, on both domestic and export demand. Purchasing up for a second month, with input stocks building at the fastest pace since July 2022. Business confidence at a three-month high. After three years of the manufacturing PMI being this section's resident sad trombone, that is quite the turnaround.
Before we hang the bunting, though, let me be careful here, because the detail has a sizable asterisk on it. Firms openly reported FRONT-LOADING orders on fears of future price rises and supply disruption - clients pre-purchasing and stock-building, with data centre rollouts repeatedly cited on the demand side. Vendor delivery times are lengthening sharply on shipping delays and geopolitically compromised routes. Input cost inflation is at a near four-year high - energy, metals, chemicals, plus the tariff, tax and labour overhead - and selling prices are rising at the fastest rate since mid-2022. Employment? Still falling, even in the winning sector. So a meaningful chunk of this "strength" is stockpiling ahead of trouble rather than organic demand, and stockpiles, once built, stop being built. I suspect a portion of the 53.9 unwinds over the summer. Lovely while it lasts. We'll see.
Now the loser - services, which is rather a problem when services IS the economy. The final number was revised up to 49.3 from a frankly alarming flash of 47.9 - so the revision gods were kind - but it still sits well below April's 52.7 and marks the first contraction in the sector since April 2025. New business down for a third consecutive month, albeit only slightly. The anecdotes write the story: hospitality and transport squeezed between reduced discretionary spending and rising input costs, professional services reporting clients turned risk-averse, the Middle East conflict damaging sales pipelines and international travel in particular.
The minimum wage rise still did some heavy lifting here in the end, it would seem. Above inflation hurts on the back of SO many above-inflation minimum wage rises on the spin. The labour response was not subtle - payroll cuts at the fastest pace since February, continuing the job-shedding theme that has run through this survey since the Employer's National Insurance rise of October 2024, a policy I have described before as the single most effective job-creation deterrent of the decade, and I see no reason to update that view. Input price inflation eased a touch versus April but remains higher than at any point since the 2022 energy crisis. Tim Moore at S&P Global called it a "reversal of fortunes", with business expectations easing for the third time in four months to a 13-month low. The composite rounds it out: 49.7 final (from a 48.5 flash), down from 52.6 - ending a 12-month run of expansion, with private sector output falling for the first time since April 2025. One sector winning on stockpiles, one sector four times its size quietly shrinking. You can guess which one the GDP print will listen to.
And then there's construction. Holy Cannoli. The construction PMI fell to 38.2 in May from 39.7 in April - the seventeenth consecutive month below 50, the steepest contraction since May 2020, and excluding the pandemic, the fastest decline since March 2009. Sit with that for a second: outside Covid, you have to go back to the global financial crisis to find a month this bad. All three categories fell sharply - residential activity the worst at 36.0, commercial at 39.0, civils declining alongside - with new orders down at the fastest pace in six years on project delays, deferred investment decisions and budget cuts. Input costs rising at the sharpest rate since June 2022 on fuel and transport surcharges; supplier delivery times the longest since December 2022; employment and purchasing both still falling; and confidence, per the release, now almost as low as it was ahead of last autumn's Budget.
The trajectory is what kills me - 39.4 in November, the January rebound to 46.4 that briefly suggested post-Budget stabilisation, then April's collapse to 39.7 as the energy shock hit, and now 38.2. The recovery lasted about as long as a January gym membership. This is the one genuine horror show in this week's data, and I don't use the term lightly - we are recording GFC-grade output falls in the sector that is supposed to be delivering 300,000 homes a year. The new-build EPC data - the best leading indicator we have for net additions - shows the 52-week rolling total flat at around 210,000. Where do we want these figures to be? The PMI anywhere starting with a 5; the EPC count starting with a 3. How far away are we? A different postcode, and the deep dive's HBF paper will explain one more reason why. Friday brings the official ONS Construction Output figures, and I'd brace accordingly.
Gilty, or not Gilty? A genuinely two-act week, played out against a three-act fortnight - so let's do the staging properly, because the context matters.
The backdrop: yields spiked to multi-decade highs in late May after the local elections put Starmer's premiership formally in play, then staged the relief rally to end them all - the biggest weekly drop in gilt yields since late 2023, driven by softer oil, shortening odds on an imminent Starmer replacement, and Andy Burnham publicly committing to maintain the current fiscal rules (that’s the biggie - an old trick used by Blair/Brown - maintaining the standards of what came before when they are perceived to be a lurch to the left). By late last week the 10-year had settled around 4.85%, the 30-year around the mid-5.5s, and everyone exhaled.
Act one of THIS week: the calm holds. Yields drifted gently lower into Thursday as oil eased on reports of a Lebanon ceasefire and hopes of broader de-escalation - the 10-year dipping below 4.9%, and the 5-year closing Thursday at 4.45%, from 4.49% on Wednesday. Worth noting Tehran spent the week reportedly drafting its own amendments to the proposed deal rather than signing Washington's - so the "peace dividend" being priced is a hope, not a document.
Act two: Friday. US payrolls printed 172k against 85k expected - nearly double - and the repricing was instantaneous. Markets moved to FULLY price a Fed hike by year-end, the US 2-year jumped about 10bps to 4.17%, the US 10-year closed at 4.55%, and UK gilts were hauled along in the slipstream within hours, the 10-year back above 4.9% by the close. The 30-year finished the week at 5.55% - down 3bps on the day and around 8bps lower over the month, but still 21bps higher than 12 months ago. Contagion in the bond markets remains instantaneous; we are takers, as ever.
Step back and the curve tells its own story. Bank Rate sits at 3.75%, the 5-year at 4.45%, the 10-year at 4.9%-ish, the 30-year at 5.55% - a steep, upward-sloping curve with 110bps between the 5s and the 30s. That long-end premium is the market's standing verdict on UK fiscal credibility and inflation persistence, and no amount of weekly noise has dislodged it. I’ve been watching and reporting on the premium being “supernormal” for a year or so now.
On policy, the market now prices nearly three Bank of England HIKES over the coming 12 months, the first pencilled in around September - and the Bank's own market-expectations series confirms the shift happened THIS week, the one-year-ahead Bank Rate reading rising from 4.23% on 27th May to 4.36% on 3rd June. Thirteen basis points of hawkish repricing in seven days, with the ECB expected to hike on June 11th and the Fed now priced to follow. The era of "all roads lead to a rate cut" - remember that? - has fully inverted, and I'd remind everyone that in February the debate was whether the cutting cycle bottomed at 3.5% or 3.25% (or lower again). The whiplash is the story.
Which brings me to the comparison I keep returning to, because the speed of it still startles me. When I wrote the 22nd February Supplement, the 5-year gilt closed that week at 3.785% and the 30-year at 5.157%. Today: 4.45% and 5.55%. That's roughly 66 basis points on the 5-year and 39 on the 30-year, in barely three and a half months - and notice the SHAPE of that move: the short and middle of the curve has repriced hardest, because this is an inflation-and-policy shock, not (this time) primarily a fiscal one. Like the wind, as we know.
How about the swaps? 4.18% on the 5-year, and 4.17% on the 3-year (12 months ago - 3.8% and 3.75% respectively). In late February the 5-year SONIA stood at 3.55% and the 3-year at 3.357%, so the journey since winter is measured in the better part of a percentage point - which is precisely why the quoted two-year fix has gone from 3.93% to 4.92% since January, and why the 25-35bps-or-so discount the 5-year swap used to enjoy is a little more fragile than it was.
The mortgage market implication needs no embroidery: lender pricing has followed the curve up a full point on the quoted side, the sub-4% fixes of New Year are a museum piece, and the effective-rate lag means the real squeeze arrives with the autumn remortgage cohort - the same 46%-bigger remortgage cohort we met in the Money and Credit section. If you have a refinance event in Q4, the £64k question is whether you price it now or gamble on a Middle East resolution and a Makerfield surprise on June 18th.
I know which way I'd lean - certainty has a value all of its own in a curve this jumpy - but I might be wrong about this; the oil price has surprised in both directions this year, and one genuine peace deal changes every number in this section. If I listen to one more podcast about $150, $200 or even $500 a barrel oil (heard that one this week!) - I might just lose my mind! Next week helps us either way: MLAR on Tuesday, the RICS survey Thursday, and GDP plus Construction Output on Friday. The Macroscope stays warm, but goes back in the case for a week.
OK. Here endeth the lesson on current rates - here comes the Deep Dive.
Where are we going this week? Neal Hudson's BuiltPlace weekly summary landed on Friday absolutely groaning with reports, and four of them caught my eye because - quite by accident - they form a complete supply chain of the rental market's current predicament: the Resolution Foundation on the tenants, CaCHE on the landlords, the HBF on the builders, and BusinessLDN on the institutional money that's supposed to be replacing us all. Read them together and you're running Bastiat's test from the top of this newsletter, four times over. In each case the visible effect is real, and usually well-intentioned. In each case the effect that "must be foreseen" is sitting right there in the data, unphotographed and largely undebated. Let's foresee it, then - two themes per paper, summary and my take on each.
Paper 1: Resolution Foundation - Housing Outlook Q2 2026 (published 23rd May)
The Resolution Foundation has used this quarter's Housing Outlook, authored by Hannah Aldridge, to launch a whole research programme on the future of the private rented sector - which tells you the think-tank world has finally noticed what we've been discussing here every Sunday: the PRS is no longer a waiting room, it's a destination. The framing is tenant-first throughout, as you'd expect from the RF, but the data is the data, and some of it should be pinned above every investor's desk.
Theme 1: The 12.9 Million - Scale and Permanence
The Summary: In 2024-25, 12.9 million people in 5.2 million households lived in the private rented sector - more than double the 5.1 million people (2.5 million households) of 2000-01, taking the sector from 9% to 20% of the population (but 19% of all the households). The vast majority of that growth occurred before 2015-16, driven by favourable tax and borrowing conditions for landlords, strong returns on residential property, worsening affordability for capital-constrained first-time buyers, and a flatlining stock of social homes. Since 2015 the sector's size has stabilised, and despite a decade of policy designed to increase the tax burden on landlords, the Foundation finds no signs that the stock of private rented homes is shrinking. The exit routes are arithmetic dead-ends: although 166,000 English households moved into subsidised housing in 2024-25, the social waiting list still grew by 10,000 to 1.34 million; even an optimistic 84,000 affordable homes a year, all allocated to the list for a decade, would leave half a million households queuing. With the median English house price at 7.6 times the median salary, ownership remains gated by familial wealth. Children are now more likely to live in the PRS than working-age adults, and the proportion of over-65s renting privately is projected to triple from 4% in 2022 to 13% by 2040.
The Propenomix Perspective: I despise the framing of the 7.6 times the median salary. When it WAS relevant, last out, back in circa 1975, one earner was commonplace in a household. That went out with the ark - and things are much better framed by a multiple of household income - which in many first time buyer households involves two income earners, not one, as is now the norm. We can argue over whether that’s “progress” or not - and there’s genuine arguments on both sides - but what we can’t argue is whether it is the cultural and societal norm at this point.
Twenty per cent of the population, stabilised for a decade, with both exits barred - one by a 1.34 million waiting list, the other by a fairly salty price-to-earnings ratio (even when correctly adjusted for societal context). Whatever your politics, that's not a transitional tenure, and the sooner policy stops treating it as a naughty step on the way to ownership, the better for everyone standing on it. For our purposes, two numbers in there are worth more than the rest of the report combined. First: no shrinkage in stock, despite everything thrown at landlords since 2015. You can also frame this, of course, as no growth when the population has grown in that time by a few million. The conveyor (wait for Paper 2) is moving, but the homes mostly aren't leaving the tenure - they're changing hands within it, which matches what I've been hedging about in Chris's listing data all year. Second: over-65s renting trebling by 2040. The long-duration, stability-seeking tenant in a sensible 2-3 bed is the demographic tailwind almost nobody prices, because the industry is still spreadsheeting for the 27-year-old flat-sharer. Will policy "seize the nettle" and fix the supply side instead of refereeing the existing stock ever harder? I'm not convinced at all - which means, I suspect, that the 20% becomes 22% before it becomes 18%. Plan accordingly, or at least don't plan against it. We are actively taking action in this area, refurbishing Multi-Unit Freehold Blocks with tenants over 40 in mind (we don’t discriminate, we just find that incomes and lifestyle choices do).
Theme 2: The Cost of Renting, and the Frozen Safety Net
The Summary: The Foundation characterises the PRS as the most expensive, least secure and worst quality of the mainstream tenures. Private renters pay more per square metre than either mortgagors or social renters and carry a higher housing cost burden; they are more likely to live in damp, energy-inefficient homes; and one in six report that their housing situation prevents them confidently planning for the future. The report goes as far as citing research relating private renting to faster biological ageing. On policy, it welcomes the Renters' Rights Act 2025 as a significant step forward in a market that has long operated with minimal regulation - but argues the Act does nothing to address the financial pressure on lower-income tenants. Local Housing Allowance remains frozen in cash terms, and the gap between available support and actual rent levels is approaching record highs. The Foundation calls for policymakers to find a stable settlement for housing support for the poorest tenants, describing this as urgent.
The Propenomix Perspective: There's plenty I'd quibble with - "worst quality tenure" flattens a sector that contains everything from city-centre new-builds to the Victorian terraces nobody else will touch, and the biological ageing line is the sort of thing that gets a report quoted on the radio rather than read - but the LHA point is dead right, and it deserves more attention than it will get. It is one of the only points that truly unites every corner of the sector, landlord or tenant focused, that I can think of (apart from the fact we need to build more - but that causes arguments based on who is doing it, how it is being funded, and whether anyone is allowed to make a profit or not).
The same political generation that legislated the RRA to protect tenants is letting the actual money that pays the rent for the poorest of them wither in cash terms. The seen: an Act protecting tenants. The unseen: the support that pays their rent, quietly freezing. And here's where it loops back to this week's market data: rents up 0.3% year on year in Chris's numbers, after years of double-digit headlines. Why has rental growth flatlined? Because the tenant base has hit its affordability ceiling - the RF has just published 30 pages of evidence for the ceiling's existence. For landlords, the implication is unfashionable but important: the era of inflation-plus rent rises doing your heavy lifting is over in much of the country, and the return has to be bought at acquisition, not extracted later. Which has been the Propenomix position since long before it was popular, to be fair. You can “need” all the rent you want from a property - but if it can’t be afforded, it simply won’t be let. Kill it (sell it).
Paper 2: CaCHE / People, Place and Policy - "Entry, Exposure and Exit: The Private Rented Sector Landlord Conveyor" (published 22nd May)
This one is a "featured graphic" in the academic journal People, Place and Policy - a single illustrated page with commentary, by Andrew Robert Watson of the University of Glasgow. Don't let the format fool you: it's built on three research projects, over 3,000 landlord survey responses and 50 interviews, and it compresses more truth about our cottage industry into one diagram than most 100-page reports manage.
Theme 1: The Conveyor Itself
The Summary: Watson models landlord participation in the PRS as a stylised industrial process in five stages. Stage one: a supply conveyor carries a heterogeneous population of would-be landlords - mostly small-scale and part-time, framing property as income, capital growth or part of a wider welfare strategy - into the sector. Stage two, the "entry accelerator", maps the investment signals that shaped their decisions, colour-coded: red for signals that were historically important but no longer apply, orange for those that remain but are weakened, green for those still operating. The sector's re-growth, he notes, was enabled by housing deregulation and the liberalisation of pension and mortgage markets. Stage three, the "management silo", captures the non-linear journey through the holding period, with portfolios reshaped as experience and appetite evolve. Stages four and five distinguish the "traditional exit conveyor" (planned and unplanned divestment - retirement, life events) from an "emergent exit conveyor" arising from recent policy change and public debate. Landlords move from green to amber when an exit trigger fires but isn't yet sufficient, and to red when a cumulative threshold is crossed - with actual divestment often delayed to suit personal circumstances, market conditions or regulatory constraints. The evidence base is Scottish, where the PRS comprises 13% of stock and where large numbers of small-scale landlords have been leaving, with policy signal changes shown to play a significant role.
The Propenomix Perspective: An academic has drawn, with citations and an ORCID number, the exact mental model I'd sketch on a workshop flipchart if you asked me why the listing data looks the way it does - and I mean that as high praise. The green-amber-red threshold mechanic is the single most useful idea here, because it explains the thing that confuses commentators most: why there's no landlord "stampede", just a relentless, multi-year drip. Nobody sells because of one Act. They go amber on Section 24, stay amber through the surcharge and the EPC saga, and then some entirely mundane trigger - a tenancy ending, a remortgage at 4.92% instead of 1.99%, a 65th birthday, Making Tax Digital - tips them red. The "delayed divestment" point matters too: plenty of red landlords are still on Chris's 747k-home shelf right now, waiting out the 21.5% pricing gap. The exit you see in the data lags the decision by quarters, sometimes years. So when this year's supply glut is dismissed as a blip - I'd gently suggest it's the opposite: it's the backlog clearing. I might be wrong about the pace, but the direction has years left in it.
Theme 2: The Entry End Is Switched Off
The Summary: The article's broader argument concerns policy. Policymakers, Watson notes, spent several decades constructing an environment that actively encouraged small-scale PRS investment - and have since fundamentally altered those signals through sustained legislative and regulatory development across the devolved nations, compounded by the structural shift from a low to a moderate interest-rate environment. Investment signals have diminished from their historic peak; alongside the documented exits, there is growing concern that fewer new landlords are entering at all. Watson observes that public and political debate about the sector - rooted in genuine micro concerns about performance (affordability, exclusion, conditions, even criminality) and macro concerns about the financialisation of housing - has become increasingly rhetoric-driven, while the behavioural dimensions of how housing systems actually respond to incentives, uncertainty and risk remain overlooked. The result, he suggests, is that housing systems respond in unintended and unexpected ways, potentially contributing to some of the outcomes now emerging across the sector - with implications for supply, affordability and access, given the PRS's pivotal role in the housing system.
The Propenomix Perspective: The exits get the headlines; the empty entry conveyor is the bigger story, and barely anyone is telling it. I first referred to this many moons ago - seen: what goes on the market that was up for rent in the past 5 years. Semi-seen: What’s bought with a buy-to-let mortgage (some rentals are of course bought in cash and stay cash for a multitude of reasons - soon when nationwide licensing/listing is in place, we will have numbers on that too). Unseen: What’s not bought that would have been bought, to let. An exiting landlord is one rental lost. A generation of accountants, dentists and tradespeople who never become landlords at all - because every signal that recruited the last generation has gone red or amber - is a structural change to who supplies rented housing in this country.
Who reloads the belt? Institutions, in theory; Paper 4 will show you how that's going in the one city where it scaled (remember, they want DINKYs or similar, or single households with deep pockets who will pay an extra £250 a month for the concierge and Starbucks, the gym and the cinema downstairs). The other thing worth sitting with is the geography: this evidence is Scottish, and Scotland has been running England's regulatory future a few years early for most of the past decade. The conveyor diagram is, in that sense, less a description than a forecast. Perhaps I'm too cynical, and yields will eventually rise far enough to flip signals back to green and restart entry - markets do clear, eventually. But notice what that clearing price is: higher rents, paid by the very tenants the policy set out to protect. Which rather undermines the original intention. The conveyor is, in effect, Bastiat's unseen - drawn as a diagram, one exiting landlord at a time.
Paper 3: HBF & Paragon Development Finance - "Licence to Bill" (published 28th May)
Whoever at the Home Builders Federation names these reports deserves a pay rise - The Viability Crunch, now Licence to Bill - and beneath the pun sits a genuinely under-reported pressure on the SME builders this column has been worrying about for years. Produced with Paragon Development Finance (who've funded over 13,000 new homes since 2018, so they see the bank statements), it examines a tax most people don't know exists: council tax on homes that nobody has ever lived in.
Theme 1: Taxed Before Anyone Moves In
The Summary: Council tax is generally understood as a charge on residents for local services. The report details how, through Completion Notices and early entry onto the valuation list, developers become liable the moment a dwelling is deemed structurally complete - regardless of whether it has been sold, occupied, or in some cases is even habitable in any practical sense. The investigation finds considerable inconsistency between local authorities in determining when a new-build counts as complete for council tax purposes, limited availability of empty property discounts, and a significant rise in appeals to the Valuation Tribunal Service relating to Completion Notices in recent years. The result is liability triggered at points that bear no relation to construction or sales timelines, leaving developers carrying recurring costs with no associated income. The report sets out recommendations intended to improve predictability and cost control for developers - which Paragon argues would also give development lenders greater confidence - alongside case studies and analysis of the legislative framework in England and Wales.
The Propenomix Perspective: File next to the forced labour tariff in the "you couldn't make it up" drawer: a services charge levied on homes that consume no services, from bins to schools, because a valuation officer has decided a building with no kitchen sink is "complete". The local authority inconsistency is the detail I'd underline - the same half-built unit can be a tax liability in one borough and not in the neighbouring one, which makes site appraisal a postcode lottery on yet another line of the spreadsheet. And who absorbs lottery risk worst? The SME builder, who can't diversify it across forty sites the way a volume player can. I've said for years that the long decline of the small builder - from delivering a huge slice of the nation's homes a generation ago to a sliver today - is the quiet structural story behind our supply failure, and every "small" cost like this one compounds it. Would the report's predictability fixes change the world? No. Would they cost the Treasury significant sums? Also no - which, in this fiscal climate, is precisely the kind of reform we might actually get. Hope springs, hedged as ever.
Theme 2: Premium Pain - When Anti-Hoarding Tools Hit the People Building the Homes
The Summary: The pressure has been compounded by two recent policy developments: councils may now apply the Empty Homes Premium after one year rather than two, and may levy up to a 100% premium on second homes - both increasingly being applied to unsold new-build stock. The report's foreword from Paragon's Neal Moy argues this signals a direction of travel in which authorities use premiums primarily to raise revenue. The case studies put figures on the squeeze: one experienced developer on an eight-unit scheme in the South East faces a minimum £12,000 council tax bill on homes that were structurally complete but unsellable for several months; another client required over £50,000 of additional funding purely to meet council tax liabilities at practical completion, with some units taking up to six months thereafter for sales to process. HBF chief executive Neil Jefferson situates the issue within the cumulative burden documented in the federation's earlier work - around £76,000 added to the cost of building a new home since 2020 - while official output runs roughly 30% below the 300,000-homes-a-year pace required by the Government's 1.5 million homes pledge.
The Propenomix Perspective: The premiums were designed for the owner of a deliberately empty Mayfair flat and the holiday-home hoarder - and I'd note, before anyone writes in, that I've defended their original purpose in these pages. Applying them to a builder whose homes are unsold because the market has a 46.1% withdrawal rate and a 21.5% pricing gap is not the same policy; it's a fine for participating in a downturn. Run the cash-flow reality: £50k of dead holding cost, on top of development finance that has repriced with everything else in the gilts section, while sales take six months to complete in treacle. That's not a margin haircut for an SME, that's the difference between starting the next site and not. The seen: a premium line item in a council budget. The unseen: the site that never gets appraised, in a month when residential construction printed 36.0 on the PMI.
Is £12k the problem against a £76k cost stack? Of course not - let's keep our honesty hats on. But it's the cheapest available signal that someone in government has noticed the building end of the conveyor is jammed too. Will it arrive before the November Budget? I doubt it - the direction of travel on premiums is revenue, not reason - but I'd be delighted to be wrong. This is the sort of thing that is “once bitten, twice shy” for the builders - and some councils have exemptions for properties being sold on the open market. Should there also be exemptions for new builds for the first 12 months (or similar) before they are sold for the first time? Depends if councils actually want new build housing (they should, because in the end, they will get the revenue and make a profit on those new builds).
Paper 4: BusinessLDN, Real Estate UK & the Association for Rental Living - "Who Lives in Build-to-Rent? London Edition" (June 2026)
The fifth edition of this annual snapshot, built on PriceHubble's Dataloft rental analytics - 21,094 residents across 12,897 homes in 40 London schemes, benchmarked against the wider PRS. It's an advocacy document, openly aiming to dispel the myth that BTR is "an expensive, luxury product only afforded by a few", and you should read it as one. But the dataset underneath is the best public window we get into who institutional landlordism actually houses - and this year it contains one number that matters more than all the demographics combined.
Theme 1: Who Actually Lives There
The Summary: The demographic core: 25-34 is the most common age band in both BTR and the conventional PRS, with BTR housing a higher proportion of couples and sharers. Finance and professional services dominate employment in both tenures (28% of BTR residents, 27% of PRS), with public sector workers broadly comparable at 10% and 13% respectively. The standout divergence is students - roughly one-third of BTR residents, against under 10% in the PRS - which the report attributes to a shortage of purpose-built student accommodation in London and the appeal of amenity-rich buildings, particularly to international students. On money: the proportion of residents earning £32,000-£37,000 is similar across both tenures, but the most common income bands diverge sharply - £19,000-£31,000 in the PRS, against £68,000-£96,000 in BTR. Rents are higher in BTR, though typically inclusive of broadband, events and shared amenities (81% of schemes offer gardens or roof terraces; 41% gyms; 49% concierge), and the earnings-to-rent ratio is marginally lower than in the PRS, with single households the most stretched in both. Pet permission has jumped from 53% of schemes in 2022 to 78% now, ahead of the Renters' Rights Act's requirement not to unreasonably refuse pets.
The Propenomix Perspective: The report sets out to dispel the luxury-product myth, then publishes income data showing its modal resident earns £68k-£96k against £19k-£31k next door in the PRS. I admire the courage. To be fair - and I'll hedge, because BTR-bashing is as lazy as BTR-boosting - the affordability ratio point is legitimate once amenities are netted off, the pet liberalisation genuinely leads the market rather than following the law, and housing a third of a building with students is real demand met, not conjured. But let's name what the data actually describes: a parallel tenure for the top decile of renters and the internationally mobile, not a replacement for the PRS that houses the £19k-£31k majority. The two markets barely overlap. Which is fine - London needs both - right up until policymakers start assuming the institutional sector can absorb the tenants of every exiting small landlord. It can't, it doesn't want to at these price points, and its own data just said so. Can we blame the sector for fishing where the fish are? Not remotely. We can blame anyone who builds housing policy on the assumption it fishes elsewhere.
Theme 2: The Pipeline Cliff, and the DMR Patch
The Summary: The supply data, sourced from the Savills/Real Estate UK Q1 2026 figures, shows a sector whose past and future are moving in opposite directions: BTR homes in planning rose 6% year on year (41,968) and completions rose 11% (62,313), but homes under construction fell 29% - 12,134 in Q1 2026 against 17,138 a year earlier - with high build costs and Building Safety Regulator Gateway 2 delays cited among the causes. On affordability mechanics: Discounted Market Rent (DMR), BTR's bespoke affordable product, is designed to sit at least 35% below local market rents for middle-income workers (household income £67,000-£90,000 or key worker status). In the sample, a third of schemes include DMR, accounting for 9.3% of homes at an average 34% discount, with residents spending an average 28% of gross income on rent; London Living Rent appears in 6.3% of schemes covering 0.6% of homes. Policy is moving: under the Government and GLA's emergency measures of March 2026, the affordable threshold for the Fast Track route drops from the London Plan's 35% to 20% for schemes validated by 31 March 2028, with BTR's affordable element delivered as intermediate rent - 30% at or below London Living Rent or Key Worker Living Rent, the remaining 70% as DMR.
The Propenomix Perspective: Forget the demographics for a moment - construction down 29% is the number this report will be remembered for, even though it appears in the introduction almost apologetically. Planning up and completions up are photographs of decisions taken in 2022-23, or well before (the average lifespan of a BTR project from inception to conclusion is 7 years); construction is the photograph of decisions being taken now, and the now says the institutional cavalry is dismounting precisely as the small-landlord exits accelerate. Viability bites the big money exactly as it bites the small - Gateway 2 doesn't care about your cost of capital.
The March emergency measures are, in their way, the most honest document the GLA has produced in years: you don't cut your affordable threshold from 35% to 20% unless you've privately conceded the 35% world produces pretty much nothing at all. Whether 20% restarts the machine with swaps where they are, I'm genuinely unsure - my instinct says it narrows the loss rather than creates the profit, and instinct is all any of us have until the Q3 starts data lands.
So, closing the loop on all four papers, because they deserve to be read as one document rather than four. The Resolution Foundation showed us a tenant base of 12.9 million people - a fifth of the country - pressed against an affordability ceiling, with the support for the poorest of them frozen in cash terms; and the ceiling isn't theoretical, it's printed in Chris's data every week, where rents are up all of 0.3% year on year because the money to pay more simply isn't there. CaCHE showed us the people who currently house most of those 12.9 million filing steadily down the exit conveyor, ambers tipping to reds one remortgage and one tax return at a time, with the entry end of the belt switched off behind them.
The HBF showed us the builders who might replace that stock being charged council tax on homes nobody has ever slept in, in the same month their sector printed its worst activity number outside a pandemic since 2009. And BusinessLDN showed us the institutional cavalry - the official replacement plan, to the extent there's ever been one - cutting construction starts by 29% in the one city where the model actually scaled. For perspective: the entire completed Build-to-Rent stock of London, after a decade of institutional enthusiasm and every Mayoral fast-track going, is 62,313 homes. The PRS is 5.2 million households. Call it a little over 1%. The cavalry is real, but it's arriving at roughly the pace of continental drift, and it has just slowed down.
Run those four facts forward and ask the only question that matters: who houses the 12.9 million in 2030? Not the social housing waiting list - it's 1.34 million deep and growing. Not the new-build machine - it's 30% below the required pace and contracting. Not BTR at 1% and falling starts. The answer, unavoidably, is the existing stock - and overwhelmingly the unglamorous middle of it, the 2-3 bed terraces and semis that rent to the £19k-£31k majority, suit the young family the RF says now defines the tenure, and will suit the tripling cohort of retired renters even better.
That stock cannot be built today for anything like what it trades at in large parts of the Midlands and North, which is precisely why buying it below replacement cost has been the strategy here since long before it was fashionable. It will be owned, increasingly, by whoever stayed calm while everyone else read the conveyor as a fire alarm - the professionals who refinanced sensibly, worked the assets harder, and treated the exits of others as their entry points. I'd hedge the timing, as ever - rates, oil and one Makerfield by-election can shuffle any quarter - but I struggle to hedge the destination.
The seen is four separate reports from four corners of the industry. The unseen is that they are one story, told four ways: demand locked in, supply locked out, and the gap widening in slow motion. I see nothing in any of them - nothing at all - that changes the thesis this Supplement has carried for years. If anything, the four of them together are the strongest single week of evidence for it I can remember publishing.
As we get towards the end for this week - I can't wait for our next workshop in London on 1st July. The VIP dinner, last time out, set new standards in terms of the length, breadth and depth of conversation - and given everything above on withdrawal rates, pricing gaps and counterparty stress, the due diligence topic could scarcely be better timed. Deals, partners, companies and counterparties including lenders and borrowers - the full gamut, plus the live DD exercise, no stone unturned. The VIP dinner will sell out once again, without doubt - get access to Rod and myself afterwards to discuss your individual and unique circumstances over dinner. Book your tickets for Wednesday 1st July, Central London at: www.tinyurl.com/pbweleven
Above all - please remember to Keep Calm, ALWAYS listen to or read the Supplement, and Carry On. A week of failed loyalty tests, hike-shaped rate curves and a construction sector on its knees is precisely the sort of week the Supplement exists for - because underneath the noise, the fundamentals haven't changed. There's a shortage of 2-3 bed terraces and semis; there was 15 years ago and it has only got worse since then - and this week's four reports are, in their different ways, four more confirmations. "Investing in property" is not a guaranteed win. Investing in undervalued areas, sexy on the spreadsheet, strong yields, bought below replacement cost - that's as close to a guarantee as you will get in any game, and it's also how you stay ahead of an inflation rate that looks more durable than anyone hoped in January. The autumn will be bumpy if effective mortgage rates catch up with quoted ones, as I suspect they will - but bumpy autumns are where the motivated sellers come from. KCCO!