Get your name down for the October Property Business Workshop in Manchester: tinyurl.com/pbwoct26
"First law of holes: when you're in one, stop digging." - Denis Healey, Chancellor of the Exchequer 1974-79
The quote pertains to the Deep Dive, where we spend some proper time on the question that continues to consume Westminster, the betting exchanges and (I confess) my own LinkedIn feed this week: who gets the red box when Andy Burnham walks into Number 10? Healey knew a thing or two about inheriting a hole. Whoever takes the Treasury this month inherits one of the deeper ones in post-war history, and the first rule still applies. Remember the Black Hole? Whether any of the candidates has read Healey is, I suppose, the £64k question. Let’s hope they don’t use him as inspiration.
Part of this week's edition was written from a departure lounge at a Croatian airport, en route to Nottingham by nightfall - the glamour never stops - so forgive me if the odd sentence reads like it was typed at a boarding gate - because it was. As the leadership transition rolls towards its conclusion and the autumn diary starts to fill up, our next Property Business Workshop is locked in for October in Manchester, and this one is about Joint Ventures and M&A - how to partner properly, how to buy businesses and portfolios rather than just houses, and how to avoid the classic structural mistakes that make lawyers rich and JV partners poor. Rod Turner and I have been polishing this one for a while and it might well be the most commercially useful day we've put together yet. Get your name down for October, Manchester, with myself and Rod Turner: tinyurl.com/pbwoct26 - and if you do come along, come along to the dinner afterwards before those tickets sell out.
Trumpwatch
Welcome back to Trumpwatch. If the last few weeks were about the rates conversation flipping and staying flipped, this week the transatlantic circus rolled into Ankara, the tariff machine growled back into life on a new legal chassis, and the IMF handed the UK a small but genuinely rare compliment. Onwards.
Ankara, and the art of the report card. The NATO summit convened in Turkey on the 7th and 8th of July, and the framing from the American side was clear enough before anyone had landed: last year in The Hague the allies pledged their way towards the 5% of GDP defence spending target, and this year Trump arrived to mark the homework. Mark Rutte, who has perfected the art of managing upwards, spent the run-in crediting Trump with driving European defence budgets higher and pointing to an additional $1.2 trillion of allied defence spending over the past decade. Trump, for his part, berated the Europeans for still not paying enough, threatened to cut trade ties with Spain specifically (Pedro Sanchez responded by describing US-Spanish relations as "very positive", which is one way of handling it), and then declared at the end that there had been tremendous unity and that NATO was making progress. Trump just throws these comments around such as “We aren’t going to be trading with them anymore” - it’s all become Standard Fare.
The substance underneath the theatre was non-zero, mind. The allies pledged a €70bn military assistance package for Ukraine for 2026 (the Czechs opted out), Erdogan came away with defence industry cooperation talks and the lifting of most US defence sanctions on Turkey, and there was a bilateral with Syria's president on the sidelines that would have been unthinkable two years ago. Whether the 5% pledges convert into actual procurement at actual factories is another matter entirely - Europe's defence industrial base remains fragmented, and I suspect the gap between the pledge and the purchase order will be measured in years rather than quarters. Personally I’d start counting energy infrastructure investment as defence - for a whole number of reasons. One thing you don’t do is grow yourself to a PERCENTAGE increase in spending - because your percentages still have to add up to 100%, one way or another. We'll see.
Starmer's last dance. This was Keir Starmer's final major foreign trip as Prime Minister (a man, under his many non-voluntary pseudonyms known as “Never Here Keir”), and there was something faintly poignant about it - not least because Trump had cheerfully announced Starmer's resignation before Starmer did, declaring that he had "failed badly" on immigration and energy. (Diplomatic protocol, Trump-style). In Ankara itself the two apparently got on fine, and the anticipated confrontation over the UK's Defence Investment Plan lacking a clear path to the target simply didn't materialise, according to Starmer at least.
The more interesting Starmer contribution, for our purposes, was fiscal. Pressed on how the UK funds the defence ramp, he explicitly ruled out defence bonds and said that the level of debt repayments the UK already faces meant further borrowing was "not the sensible place to go" for extra defence money. Feels a bit like a stitch-up, to be honest; something from the Jeremy Hunt playbook. What he means is “we haven’t been able to get it to add up so far” - hold that thought, because the debt interest arithmetic comes up again in the Deep Dive, and it is (as you will know) the single most important constraint on whoever takes the Treasury. The outgoing PM has, in effect, left one more of those little notes on the desk saying "good luck, there is no money". Has it ever happened before?
Burnham, meanwhile, is expected to enter Number 10 on or around the 20th of July, barring a highly unlikely last-minute challenger, and his team has been signalling a foreign policy reset: closer structural ties with the EU, domestic reindustrialisation, and rather less of the immediate pilgrimage-to-Washington instinct. How that squares with a tariff-wielding White House is anyone's guess. Mine would be: bumpily.
The tariff machine finds a new legal chassis. Regular readers will remember the arc here. The Supreme Court struck down the IEEPA "Liberation Day" tariffs in February. Trump pivoted to Section 122, which allows a 10% global tariff for a maximum of 150 days - a clock that runs out later this month. And so the administration has now rolled out its intended replacement: Section 301 tariffs on 60 trading partners (59 countries plus the EU), justified this time not by reciprocity or emergencies but by those partners' alleged failure to prohibit imports made with “forced labour”. Now if anyone in the Western World pays slave labour rates…….oh the irony, once again, Mr T.
The proposed rates are 10% for the six jurisdictions deemed to have partial regimes in place (Canada, Mexico, the EU, Indonesia, Ecuador and Pakistan) and 12.5% for the other 54 - a list that includes China, Japan, South Korea and, yes, the United Kingdom. The USTR's three-day public hearing ran from the 7th to the 9th of July, with everyone from the American Petroleum Institute to Le Creuset (I am not making that up) filing objections. Jamieson Greer's framing is that weak forced-labour bans create an "unlevel playing field" for American workers.
Let me be more specific here, and for a change a shade less flippant, because there is a genuine moral issue buried under the trade lawyering - forced labour in supply chains is real and serious, and US law has prohibited such imports since 1930. But the design of this package tells its own story. The 60 partners under investigation account for roughly 95% of US imports by value. The rates almost exactly replicate the expiring Section 122 duties. And unlike Section 122, Section 301 tariffs don't expire after 150 days. This exposes this whole manoeuver as being far less like a targeted human-rights measure and far more like a like-for-like swap of revenue source, with a legal basis the courts are less likely to strike down. Critics said as much at the hearing. Am I being too cynical? On this administration's trade record, I doubt it.
For the UK, the practical point is that we sit in the 12.5% column, not the 10% one - our failure, per the USTR report, being the absence of a legislated import ban on forced-labour goods rather than weak enforcement of one. Add to that the separate spat over the UK's plan to mirror the EU's anti-deforestation rules, which Washington reads as a non-tariff barrier aimed at US agricultural exports, and the incoming Burnham government inherits a trade relationship that is prickly on at least two fronts before anyone has unpacked a box. Words exchanged thus far haven’t been complementary, either.
Iran, oil, and the ceasefire that wasn't. Three weeks of relative calm ended abruptly this week. The mid-June memorandum of understanding had done its job for a while - Hormuz reopening, oil settling in the $69-70 range - and then on Tuesday Iranian forces attacked three commercial ships in the Strait, and by Wednesday Trump, speaking from the NATO summit itself, declared the ceasefire "over" and negotiations a "waste of time", with US forces launching retaliatory strikes and the Treasury revoking the waiver that had let Iranian oil back into the global market. Brent jumped more than 5% to above $78, its biggest one-day move since early June, and as I write we are several days into the wobble with prices bouncing around rather than settling. Perspective is still needed: the strikes so far have been described as narrowly targeted at Iran's maritime strike capability rather than energy infrastructure, and $78 Brent remains a long way below the near-$120 wartime peaks. But the direction of travel, which had been quietly helpful for UK inflation for three weeks, has reversed - and with talk of blockades and Kharg Island floating around, I wouldn't want to call the next fortnight in either direction. Keep half an eye on the petrol forecourt; the June CPI transport numbers were ugly enough already. As before, each day it goes on extends the likely length of the “re-conflict” by more than a day.
How about the IMF's July World Economic Outlook update, and a sentence I don't get to write often: the UK was the only G7 economy to receive an upgrade. The Fund now projects UK growth of 1.0% for 2026, up from 0.8% in April, reflecting a robust Q1 and the energy shock proving less severe than feared (the report lags real time, of course). That puts us third in the G7 for 2026 growth, behind the US (2.3%, riding the AI investment boom) and Canada (1.1%), with 2027 unchanged at 1.3%. Global growth is pegged at 3%, and the Fund flags global headline inflation rising to 4.7% in 2026 - along with a rather pointed warning about "a possible correction in technology-driven expectations", which is IMF-speak for what happens if the AI trade wobbles. One percent growth is not a boom. But given what was being forecast for us in the depths of April, I'll take resilient and quietly getting on with it. By the way, we’ve already had 0.6% or so even if we only take into account the figures to April - so it’s not rocket science here from the IMF, as usual.
Why any of this matters to a landlord in Wolverhampton. Two channels, as ever. Tariffs feed global inflation, and global inflation feeds the gilt market's view of how long UK rates stay high. And the political transition feeds directly into gilt pricing this week - more on which in the gilts section and the Deep Dive, because the moves were not subtle. When the market repriced its one-year-ahead Bank Rate expectation this week, it wasn't reacting to a data release. It was reacting to Westminster.
Phew - stepping away from the transatlantic macro-storm and the Westminster parlour games, back we go to the comparative safety of the UK real-time property market, where the numbers at least have the decency to arrive weekly and on time.
As is customary, Chris Watkin has been relentlessly crunching the portal numbers and publishing them at Property Industry Eye. His analysis for Week 26 of 2026 - the halfway line of the year, no less - is where it is at, as always. If you want to know how the macroeconomic gridlock and the Westminster soap opera translate to the local high street, and the REAL property market on the ground, look no further. His headline this week: more stock, tougher market, and accurate pricing becoming critical. Sound familiar? It should - it's been the theme of the whole year, but the numbers underneath it have shifted in some interesting ways.
Supply first. 36.5k new listings came to market this week, up from 35.4k last week, against a 2026 weekly average of 37.2k and a ten-year Week 26 average of 34.9k. So we remain comfortably above the historic norm on the weekly flow. Year to date we sit at 967k new listings - identical, to the thousand, to 2025's year-to-date figure, 4.6% ahead of 2024 (924k) and 12.5% higher than the 2017-19 pre-Covid average (860k). My year-plus adage of "10% more stock than a normal market" as the ready reckoner has needed revising upwards for a while now, and 12.5% over the pre-Covid norm on the flow numbers confirms it. The tap has not been turned off, and the bath is close to the overflow level. The question - and we'll come back to this when we get to RICS in the Macro section, because their instructions data tells a subtly different story - is whether the tap is starting, just starting, to tighten - it has been appearing to lean that way over recent weeks.
Demand. 23.8k homes went sold subject to contract this week, a touch down on last week's 24.1k, against a ten-year Week 26 average of 26k and a 2026 weekly average of 24.8k. So we're running below both the long-term norm and our own yearly average this week. Year to date the picture is the one Chris headlined: 644k gross sales, which is 6.8% below 2025's 691k - around 47,000 fewer sales agreed at the halfway point of the year. That's the cooling. But context matters enormously here, and this is where the crash-callers consistently get it wrong: 644k is still 0.8% ahead of 2024, 10.7% ahead of 2023, and 7.3% above the 2017-19 pre-Covid years. We are not in a frozen market. We are in a market that has come off a strong 2025 and settled at a level that would have looked entirely respectable in almost any pre-pandemic year. The Five Ds (death, debt, divorce, downsizing and diddy ones) keep doing what they always do - people's lives don't stop for a leadership election, whatever the commentariat might imagine. The annual picture looks OK to healthy - the picture for June looks like an early warning (and looks like a market symptomatic of a 15% drop in mortgage approvals in May, as well - as reported last week).
Net sales - gross sales less the fall-throughs - came in at 18k for the week, down from 18.6k, against a ten-year average of 19.9k and a 2026 weekly average of 19.3k. Year to date: 502k net sales, 5.2% below 2025 (529k), 0.3% ahead of 2024, 12.3% ahead of 2023, and 5% above the 2017-19 average. Same shape as the gross numbers, which tells you the fall-through picture isn't deteriorating - and indeed it isn't, of which more below. 10% below pace in terms of averages - a market that’s, in the now, 10% slower (and it was hardly charging before, as you will know) - that’s the right number to have in your head.
Exchanges. June logged 48.6k exchanges so far, and Chris notes this figure will rise substantially through July as the reporting lag catches up - on past trends he'd expect it to finish in the late 70k's. Worth remembering whenever you see a scary "exchanges collapse" headline mid-month: the data simply arrives late. It always has.
Now the friction metrics, which is where the real story lives this week. Price reductions ran at 25.8k this week, on a base of 760k homes for sale. In June, 14.3% of all UK homes on the market took a price reduction, up from 13.4% in May, and the 2026 year-to-date average of 12.9% sits well above the six-year long-term average of 10.7%. Salami-style, as Chris has long put it - slice after slice coming off overambitious launch prices. Withdrawals reached 49k for June (again, a figure that will rise as the lag unwinds). And the sell-through rate - the percentage of homes on agents' books going SSTC in the month - slipped to 13.8% in June from 14.6% in May, against a pre-Covid average of 15.5%. More stock, fewer buyers per property, slower conversion. That is the "tougher market" in Chris's headline, in three concepts.
But here is the one that made me sit up. The gap between the average asking price of homes being listed (£423k) and the average asking price of the homes actually going sold STC (£369k) has come in at 16.6% - and the long-term ten-year average is 16 to 17%. Regular readers will remember when I was calling this gap intergalactic - it was north of 25% not many weeks ago. It is now, whisper it, back to earth. Back inside the historic range. I'm not entirely sure how much of this is agents finally pricing realistically at instruction versus the composition of what's selling shifting, and I'd want a few more weeks of data before declaring a trend - but if sellers and their agents are actually meeting the market at the point of listing rather than eighteen price cuts later, that is the single healthiest development the sales market could produce. It's also exactly what you'd expect to see when 14.3% of the market is taking reductions in a single month: the medicine is unpleasant, but it appears to be working.
Fall-throughs support the picture of a market that is functioning rather than failing: the fall-through rate is 24.4% against a decade average of 24.5%, and just 5.07% of homes sold STC fell through in June - below both the 2025 average of 5.3% and the ten-year average of 5.8%. The probability-of-selling figure (the percentage of homes leaving agents' books via exchange rather than withdrawal) sat at 50% for June against a seven-year average of 57.6%, although Chris notes that June's figure will move as the month's data completes. Half of everything that leaves the shelf leaves it unsold. Estate agency remains a brutally hard way to earn a living, whatever the fee critics imagine.
Stock and pipeline. 760k homes on the market on the 1st of July, up from 747k a month before but actually a shade below the 763k of twelve months ago - so standing inventory has finally plateaued year-on-year even as the flow of new listings runs high, which tells you homes are leaving the market (one way or the other) at pace. The agents' sales pipeline stands at 475k, down from 493k a year ago. This is all congruent with the theory that no-one has yet been able to prove - but likewise they haven’t been able to prove it wrong. The “average landlord” at the moment isn’t on top of all these figures, feels like selling up when they get a chance, allows the property to be overpriced by an agent, doesn’t sell it, and then re-lets it when they can’t get the price they want or a price they can live with. That’s happening with incredible regularity at the moment. So what? Harness this, understand this journey, time correctly, solve the problem with a creative solution. That is your job - and that is the money shot.
£ per square foot - the metric I keep banging on about because it matches the Land Registry index with 98% accuracy five months in advance. June's agreed sales averaged £350.22 per sq.ft, 1.94% higher than twelve months ago (£343.54) and 12.3% above five years ago (£311.93). So while the headline indices flap around either side of zero, the pound-per-square-foot reality on agreed deals is: modest, unspectacular, positive growth. Roughly 2%. In an economy with CPI at 2.8% at last reading, that's a small real-terms decline (RPI was higher still, in the 3s), and honestly that feels about right for where we are. Still getting cheaper in real terms for the moment, and let me predict it here first - whatever happens with the Red Box, we’ve got yet one more summer of speculation about property taxes, which will once again jam up the market at 500k and above. At the very least. Nothing learned yet by this lot, folks.
Rents. The week 26 average rent came in at £1,835 pcm; June 2026 as a whole averaged £1,808 against £1,791 in June 2025 - so headline rental growth of around 1%, a far cry from the double-digit madness of recent years. Please remember this is NEW RENTS, as advertised on the portals. Rental stock available sits at 315k, up from 307k a year ago. More stock, flatter rents - the rental market is quietly normalising too, at least at the national aggregate level, though I'd caution (as ever) that the national average conceals enormous local variation, and what I see and hear on the ground in the Midlands particularly doesn't always feel as calm as the aggregate suggests.
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!
Stop - Macro time.A slightly unusual line-up this week: the Construction PMI, limping in as ever. The house price index formerly known as Halifax - yes, really, and we need to talk about Howard. The RICS Residential Market Survey, which contains the most interesting supply signal of the week. And bringing up the rear, the contract states that we have to talk about the gilts and swaps, and this week the contract earns its money, because the moves were substantial.
Construction PMI. Deep breath. The S&P Global UK Construction PMI registered 38.4 in June, up fractionally from May's six-year low of 38.2 and below expectations of 40. For those keeping count, and I am: construction output has now fallen in every single month since January 2025. Eighteen consecutive months of contraction. The June reading was the second-fastest decline since the start of the pandemic, which is a strange sentence to write about a month in which the index went up.
The composition is where it gets properly grim for our sector. Commercial construction was the "best" performer at 41.5 - still contracting, but more slowly than in May. House building fell to 35.9, the sharpest decline of 2026 to date. And civil engineering collapsed to 22.1, its worst reading since April 2020, when the entire country was locked in its house. It’s such a bad reading it almost makes a joke of the index. Firms blamed subdued housing market conditions, higher borrowing costs, elevated uncertainty and delayed project starts. Employment fell for the eighteenth consecutive month. I ration the phrase "horror show" carefully, but a housebuilding index at 35.9 while the government's entire housing strategy depends on 1.5 million new homes earns it, whichever way you slice it. You cannot build your way out of a housing shortage with an industry that is shrinking this quickly. Viability will continue to plague Burnham.
Two crumbs of comfort, because I do try to find them. Input cost inflation eased from May's near four-year peak (though 53% of the panel still reported rising costs, against 1% reporting falls - so "eased" is relative). And business optimism rebounded to its best since March, with 38% of firms expecting activity to rise over the year ahead against 19% expecting a decline, on hopes of public sector projects, infrastructure spending and delayed schemes restarting. Tim Moore at S&P Global noted that recent contract awards had underpinned the improved mood. Hope, then, is not dead - but hope has been the sector's main input material for about a year and a half now, and you can't pour foundations with it. Rightmove separately reported this week that the number of new build developments coming to market is at its lowest since January 2017, and Vistry's trading update showed private sales discounting running at 7.1% in H1 against 1.4% a year earlier, with land buying scaled right back. Every data point sings the same tune. The supply pipeline for the next three to five years is being decided now, and it is being decided downwards - which, for those of us holding existing stock of the kind Britain persistently fails to build (the 2-3 bed terraces and semis, as I've been saying for years), is the quiet long-term story underneath all the weekly noise.
Next up: the house price index formerly known as Halifax. From this month, the Halifax House Price Index is the Lloyds House Price Index. The methodology is unchanged, the data series still runs back to January 1983, S&P Dow Jones Indices still administers it - but the name on the tin changes, because Lloyds Banking Group is retiring the Halifax brand altogether after 173 years. Founded in West Yorkshire in 1853, demutualised in 1997, swallowed into Lloyds in 2009, and now, finally, absorbed entirely. Existing customers keep their sort codes and, we are assured, "the same friendly faces in our branches".
Let the pedants, like me, mourn properly for a moment. For those of a certain vintage, Halifax isn't a bank so much as a set of adverts - and specifically it is Howard. Howard Brown, the actual branch worker from Sheldon in Birmingham (a man from my neck of the woods, no less) who became improbably famous singing "Who gives you extra?" at the turn of the millennium. An entire generation's mental model of retail banking is Howard, beaming, giving you extra. Nobody, and I want to be clear about this, has ever written a jingle about the Lloyds House Price Index. The black horse gets the brand; Howard, wherever he is, hands back the extra. End of an era. Onwards.
To the numbers, which were actually mildly encouraging. UK house prices rose 0.2% in June - the first monthly increase in four months from the HBOS group index or whatever we might call it for a bit - taking the annual rate up from 0.5% to 0.6% and the average price to £299,330. The regional spread remains the real story: Northern Ireland continues to lead the UK at +7.4% annual growth, while the East of England props up the table at -2.0% year-on-year (average £381,654). Amanda Bryden, Lloyds' head of mortgages, noted that mortgage approvals dipped in May - unsurprising given the earlier spike in rates - and that she'd expect activity to recover assuming borrowing costs continue to ease, with the market moving at "a measured pace". Which, decoded, is roughly what Chris Watkin's portal data has been telling us for months, and roughly what the £/sq.ft number says too: a flat-to-marginally-positive market, with the North and the Celtic fringe doing the growing and the expensive South and East doing the correcting. The two-tier market rolls on (Cheap vs expensive, if you prefer, which then easily translates into North vs South - Northern Ireland has its own drivers).
Onto RICS, and the June Residential Market Survey - sentiment rather than transactions, but sentiment from the people standing in the hallways doing the viewings, so it counts. The headline reads: still negative, but less so, for a second consecutive month. New buyer enquiries improved to a net balance of -29% from -34% in each of the previous two months, the least negative since February. Newly agreed sales edged up to -32% from -35%. Near-term sales expectations improved to -16% from March's low of -34%, and the twelve-month sales outlook is now dead flat at +1%. Prices: broadly stable with modest downward pressure nationally, and the twelve-month price expectation edged up to +8% from +6%. Tarrant Parsons at RICS framed it as cautious encouragement that the worst of the slowdown may be beginning to pass, while noting - correctly, I think - that any improvement is fragile and is now being tested by renewed political uncertainty at home. One respondent noted the process itself has become the barrier, with listing-to-completion times recently hitting 21.5 weeks, the longest on record. Five months. To buy a house. The home-buying reform roadmap we covered a few weeks back cannot come fast enough.
But the number I actually flagged, and the reason I told you to hold the supply question from the Watkin section: new instructions to sell fell to a net balance of -23%, from -10%, the weakest reading in over a year. Surveyors, in aggregate, are reporting the flow of fresh stock drying up even as portal-level listings run 12.5% above pre-Covid norms. Those two things can both be true - the portal data measures the actual count, RICS measures the direction of change as agents perceive it - and the reconciliation would be that the supply surge has peaked and is starting to roll over. If that's right (and I'd give it a "perhaps" rather than anything stronger), then the great stock glut of 2025-26 may be topping out, which over a 6-12 month view would put a floor under prices rather sooner than the consensus expects. Watch this space. I certainly will be.
On lettings, tenant demand picked up to +18%, the strongest since May 2025, while new landlord instructions were less negative at -18% (from -28%) but still shrinking - the structural undersupply story of the PRS remains fully intact, and surveyors project rental growth of around 2.5% over the next twelve months. Squaring that with Chris's 1% actual rental growth print is the usual exercise: sentiment says rents grind higher, the spot data says the grinding has slowed. Both can be right at different horizons.
Gilty, or not Gilty? Very Gilty this week, I'm afraid, and for once the culprit was not Washington or the oil price. It was us.
The 5-year gilt started the week in the 4.28% region, ground higher on Tuesday, then jumped decisively on Wednesday and Thursday as the chancellor speculation reached full boil - touching roughly 4.5% at Thursday's peak before settling back to close the week at 4.412%, down 2.4 basis points on Friday itself. The 30-year told the same story with more drama, as the long end always does: from around 5.5% early in the week to a peak near 5.7% on Thursday, closing at 5.600%. For context, the 30-year's 52-week range is 5.033% to 5.877% - so we are sitting in the upper third of the year's range at the long end, and the 5-year (52-week range 3.668% to 4.779%) isn't far off the same position. Twelve months ago both were meaningfully lower; the "higher for longer" regime is not loosening its grip.
What moved midweek? I can't prove causation from a yield chart, and I won't pretend to - but the timing lines up rather neatly with the next-chancellor race hardening around Ed Miliband as favourite, and the market doing exactly what I suggested in my LinkedIn post this week it would do: pricing in more borrowing the moment his name firms up. Oh - and the reignition of the Iran situation, of course!
The Bank of England's own market-implied data makes the repricing explicit: the one-year-ahead Bank Rate expectation stood at 4.25% on the 8th of July, up from 4.00% on the 1st of July. Twenty-five basis points of additional expected tightening, in a week, with no MPC meeting and no inflation print in between. That is a political repricing, not an economic one. The rates conversation didn't just stay flipped this week - it flipped harder, by a quarter of one per cent.
Swaps: the 5-year SONIA swap closed Thursday at 4.14%. Set that against a Bank Rate of 3.75% and the shape of the argument is unmissable - the swap market is paying a 39 basis point premium over today's base rate for five-year money, versus a 25 point (or so) discount to the gilt yield - which is the market telling you once more that it believes the next move, or at least the balance of moves over the period, is up not down - and more vehemently. (The June MPC vote, remember, was 7-2 to hold at 3.75%, with Greene and Pill wanting 4.00% - the hawk camp having doubled from April's lone Pill dissent.) The August MPC meeting now takes place amid a leadership handover, a chancellor announcement and possibly a market reaction to that announcement, which is quite the backdrop for nine people trying to read an economy.
For mortgage pricing, the irony is that the quoted-rate data is still improving even as the forward curve deteriorates: the Bank's June figures show the average 2-year fix at 75% LTV falling to 4.81% from 4.92% in May. Lenders were repricing downwards off the earlier oil-driven panic right up until this political wobble. Whether they can keep doing so with 5-year swaps at 4.14% and rising is doubtful - my suspicion is that the best fixes on the shelf right now are as good as it gets for a few months, but I've been wrong about the mortgage market's competitive appetite before (lenders have targets, and it's a volume-starved year), so treat that as a hedge-wrapped hunch rather than a forecast.
OK. Here endeth the lesson on current rates - here comes the Deep Dive, and this week the four reports are really one question wearing four coats: who pays for the money? Who holds the red box, what the mortgage market does to five million households, whether rent controls take money off landlords or off the market, and whether the state should buy back its own balance sheet. Let's get into it.
Where are we going for the Deep Dive this week? For once the curation did itself. I put a post on LinkedIn this week about the race for Number 11, and the response - plus what the gilt market did - convinced me it deserves the full treatment as our first "paper", drawing on the betting markets, the membership polling and the fiscal arithmetic. Then the Bank of England's July Financial Stability Report landed with some properly important numbers on the mortgage refinancing wall. Then, with impeccable timing, UCL's Institute for Innovation and Public Purpose and the New Economics Foundation published new modelling on rent controls - launched with the Green Party's Zack Polanski quoting it on the Today programme, and all over my LinkedIn feed within the hour - which lands squarely in the middle of both the chancellor question and the Burnham housing conversation. And Shelter commissioned Savills - an odd couple if ever there was one - to price up what it would take to fix council housing's broken balance sheet, which connects straight back to the case I made in the Burnham housing Deep Dive a fortnight ago. Four reports, one question: who pays for the money?
Paper 1: The Red Box Sweepstake - who gets the Treasury, and what the gilt market does about it
Andy Burnham's biggest first decision isn't devolution or housing. It's who he sends to Number 11 - and the gilt market will mark that homework within hours of the announcement. That was the framing of my LinkedIn post this week, and I stand by every word of it, so let's do this properly.
Theme 1: The arithmetic any chancellor inherits
The Summary: Whoever takes the Treasury inherits a fiscal position that constrains every other choice. May's public sector borrowing came in at £23.3bn, £5.4bn higher than the same month last year, with debt interest for the month hitting £11.7bn - a record for any May. The outgoing Prime Minister put the same point in his own terms at the NATO summit this week, ruling out defence bonds on the grounds that the level of debt repayments the UK already faces made further borrowing "not the sensible place to go". The IMF's July update, while upgrading UK growth to 1.0% for 2026, continues to assume a steady fiscal consolidation of around half a percent of GDP per year, relying primarily on taxation, as the price of stabilising debt over the medium term. Meanwhile the market-implied path for Bank Rate moved sharply this week: the Bank of England's yield-curve data shows the one-year-ahead expectation for Bank Rate at 4.25% on 8 July, up from 4.00% on 1 July, and long gilt yields sit in the upper third of their 52-week range. The autumn Budget - now the sole fiscal event under the revised framework - will be the new chancellor's first, and possibly defining, act.
The Propenomix Perspective: Gilts price swaps, and swaps price your mortgage. This is not just Westminster parlour games, and I make no apology for repeating myself on it. £11.7bn of debt interest in a single month is the context for every manifesto fantasy you will hear over the next fortnight - it's roughly a Crossrail every two months, spent on servicing the past. The bit I find oddly under-discussed is Starmer's parting fiscal message: the outgoing PM of a Labour government publicly stating that the debt burden precludes more borrowing is about as clear a handover note as you'll ever see. Whether the incoming team reads it that way, I'm not convinced. Healey's first law of holes applies - and the market, not the manifesto, decides when you've stopped digging. My honest read: the fiscal rules survive in name whoever gets the job, because the alternative is a gilt strike, but the composition - how much tax, whose tax, how creative the definition of "investment" can be - varies enormously by name. Personally I’d have social housing RIGHT in there as critical infrastructure, for example - and there’s a great case for it that we will re-examine in a future week.
Theme 2: Miliband at 60% - the green capex chancellor
The Summary: The betting exchanges have installed Ed Miliband as clear favourite for the Treasury at around 60% implied probability (best price roughly 8/11), a remarkable reversal from a week earlier when Wes Streeting was the hot favourite. The membership data supports it: YouGov polling of Labour members has Miliband as their top pick at 21%, narrowly ahead of the 20% who would keep Rachel Reeves, with 69% believing he would do a good job as chancellor and 25% expecting a "very good job" - a higher strong-approval score than Reeves' own record commands. Miliband has coveted the Treasury for years and his policy identity is built around large-scale green capital expenditure. The appointment would not be without friction: Trump administration officials have briefed that giving the role to Miliband "would be a mistake", and senior minister Darren Jones has appeared to counsel Burnham against the move. Public polling is notably cooler than member polling - an Express readers' poll placed him far behind both Streeting and Shabana Mahmood - though such self-selecting surveys carry obvious health warnings.
The Propenomix Perspective: The soft left's choice, and a man who has wanted the job for years. Big green capex instincts. Net Zero Zealot would be my fear - and I choose the word "fear" advisedly, not because decarbonisation is wrong (the direction is right and, for what it's worth, the retrofit economy is a genuine opportunity for our sector) but because the funding instinct that comes with it is borrow-and-build at scale, into a gilt market already charging 5.6% for 30-year money. I suspect the market prices in more borrowing the moment he's named - in fact I'd go further and say it already started this week, on the rumour alone. Look at the 25 basis point jump in the one-year-ahead Bank Rate expectation - is it all Iran? It’s hard to tell.If he's confirmed, watch the 30-year on announcement day: that is where the verdict lands first. For borrowers, a Miliband Treasury probably means the swap curve stays elevated for longer than the economics alone would justify. Perhaps he surprises us all with Treasury orthodoxy - the office does strange things to people - but I wouldn't build a refinancing strategy on it.
Theme 3: The field - McFadden, Mahmood, and the strange death of the Streeting boom
The Summary: Pat McFadden sits second in the market at around 20%. He is the "safe pair of hands" candidate gathering support among MPs: continuity, fiscal rules intact, minimal market reaction expected. Shabana Mahmood, the Home Secretary, trades around 12% as the dark horse - reportedly one of the few cabinet figures who believes in cutting some areas of spending, less known to markets but with a proven grip on difficult departments; her odds had earlier halved from 8/1 to 4/1 in a week, and she has signalled contentment in her current role. Everyone else sits in single digits, with Reeves staying put described in the briefing as the "last-but-one resort". The strangest data point is Wes Streeting: at one stage the market priced him as high as 70% for the job, and he has since collapsed into single digits - an enormous move in a market widely believed to contain genuine insiders. YouGov's member polling underlines his difficulty: 39% think he would make a good chancellor but 43% disagree, the weakest net score among the leading names.
The Propenomix Perspective: McFadden is dull, and dull is a feature, not a bug - markets would barely blink, the swaps curve would probably exhale ten basis points, and the autumn Budget would be a continuity affair. Mahmood is the genuinely interesting one: a chancellor who actually believes in spending discipline would be the biggest positive surprise the gilt market has had in years, though "less known to markets" cuts both ways in week one. The Streeting move is the one I can't fully explain, and I'm suspicious of things I can't explain. From 70% to single digits is not drift, it's information - this market is full of insiders, and a move out of that magnitude can't be ignored. Home Office for Wes? That would be my guess, though it is only that. And the "last-but-one resort" framing around Reeves tells its own quiet story about how the Burnham camp views the incumbent: not sacked on day one, but not wanted either. For what it's worth, I ran a poll on the post - small sample, entirely unscientific, and my little corner of LinkedIn had Mahmood ahead of Miliband. The property crowd knows what it wants: someone who can count.
Theme 4: What it means for your mortgage rate
The Summary: The transmission channel from the appointment to household finances is mechanical and fast. Gilt yields respond to the perceived fiscal trajectory; SONIA swap rates price off the gilt curve and rate expectations; fixed mortgage rates price off swaps. This week provided a live demonstration before any appointment was even made: 5-year gilt yields rose from roughly 4.28% to a 4.5% peak midweek before closing at 4.412%, the 30-year touched nearly 5.7%, and the 5-year SONIA swap closed Thursday at 4.14%, some 39 basis points above the current 3.75% Bank Rate. The Bank's quoted-rates data shows lender pricing was still improving into June (average 2-year fix at 75% LTV down to 4.81% from 4.92%), meaning the political repricing has yet to feed through to the mortgage shelf. The August MPC meeting - the first of the Burnham premiership - will take place with the vote split already at 7-2 towards a hike and the market now pricing Bank Rate above 4% on a one-year view.
The Propenomix Perspective: So here's the practical read, hedged as it must be. Scenario one, McFadden or Mahmood: modest relief rally at the long end, swaps drift back towards 4%, the current crop of fixes survives and maybe improves into autumn. Scenario two, Miliband: the long end sells off, how much depending entirely on what he says about the fiscal rules in his first 48 hours, and the sub-4.8% average fixes in the 2-year resi market quietly disappear while lenders wait for the dust. I'd put meaningful probability on scenario two simply because the market already does. What would I actually do about it? If you have a refinance due in the next six months, the honest answer is that securing something now and asking for a rate-drop review later is the asymmetric play - most lenders will let you move down before completion, none will let you move down after the curve has gone the other way. Take those prices now! That's not advice, it's arithmetic. And whichever name comes out of Number 10's front door, remember that one man decides this - the exchanges aren't the electorate here. We are all just marking probabilities on another man's coin toss. Ish.
Paper 2: The Bank of England Financial Stability Report - five million households and the refinancing wall
From the politics of the money to the price of it. The Bank's July FSR is a document I read cover to cover so you don't have to, and this edition contained the clearest map yet of the mortgage repricing still to come - along with confirmation that the credit taps are being loosened at the margin in ways that matter enormously for our market.
Theme 1: The refinancing wall, quantified
The Summary: The FSR projects that a little over 5 million households will see their mortgage repayments increase by the end of 2028 - up from nearly 4 million in the same projection at the time of the December FSR, a deterioration of roughly a million households in seven months as the expected path of rates has shifted higher. Within that, the Bank identifies nearly 750,000 households currently paying interest rates below 3% - the remaining tail of the 2020-21 fixing cohort - who will roll off those fixes during 2026 and face an average repayment increase of £170 per month. The report frames overall household resilience as broadly maintained, with aggregate debt-servicing ratios remaining below previous stress episodes, but the distributional point is explicit: the adjustment is concentrated in a cohort that borrowed at the cheapest rates in the history of the series and is repricing into a 4.8% quoted-rate environment. The December-to-July revision - a million additional households pulled into the repricing net - is attributed to the market-implied rate path moving higher following the energy shock and the stalling of the cutting cycle at 3.75%.
The Propenomix Perspective: The £170 a month number is the one to hold onto, because it translates the entire gilts section of this Supplement into a household budget line. That's £2,040 a year, after tax, per affected household, times three quarters of a million households rolling off this calendar year alone - a £1.5bn-ish annual demand withdrawal from exactly the consumers the growth forecasts need to be spending. At the most stark point - nearer to the lettuce’s efforts - this number was more like £500 a month, for context. I'd note the direction of revision too, because it maps precisely onto the rates conversation flipping: December's FSR was written when the market still believed in cuts; July's is written in a world pricing hikes. Same households, same mortgages, a million more of them in the net. For landlords the read-across is double-edged, as it usually is. Some of those 750k become forced sellers or non-movers, which feeds the Five Ds and the deal flow. But some of them are your tenants' landlords, repricing their own BTL debt and passing what they can into rents - except Chris's data says rents are only carrying 1% growth right now, so the pass-through room isn't there. Margin compression for the leveraged amateur, in other words. The professionalisation of the sector continues, one remortgage at a time - and I say that as description, not celebration.
Theme 2: The quiet loosening - high-LTI lending expands
The Summary: The FSR's Chart of the Week (as BuiltPlace flagged it) covers lending at or above 4.5 times income. The share of new mortgage lending at high loan-to-income multiples rose to 13.2% in Q1 2026, up from 11.8% in Q4 2025, following the FPC's updated Recommendation in Q2 2025. The four-quarter rolling average now stands at 10.8%, still below the 15% flow limit. The Bank attributes the increase to a combination of factors: strong credit supply and competition among lenders; the FCA's clarification of its Mortgage Conduct of Business rules on the stress rates used to test affordability; and a number of lenders taking up the PRA's Modification by Consent to disapply their individual loan-to-income flow limits. In plain terms, three separate regulatory and supervisory adjustments are simultaneously enabling more borrowers to take larger mortgages relative to income, and lenders are competing to supply them, in a year when transaction volumes are otherwise subdued.
The Propenomix Perspective: Regular readers know I've been tracking the regulatory easing thread for a couple of years - the direction of travel from the FCA, PRA and FPC has been consistently towards loosening the post-2014 constraints, and here it is showing up in the flow data. 11.8% to 13.2% in a quarter is a big move in a slow-moving series. Is it sensible? Two honest answers. At the individual level, stretching to 4.5+ times income at 4.8% mortgage rates means committing something like 29% of gross income on a 30-year term (the BuiltPlace arithmetic, of which more in a moment) - stretched but survivable for stable earners. At the system level, I'm more relaxed than the permabears: 10.8% rolling average against a 15% limit leaves headroom, and this is exactly the countercyclical loosening the framework was designed to permit. But let's not kid ourselves about what it does to prices. More credit against the same houses means higher prices, not more houses - I've been saying it for years about Help to Buy and it applies with equal force here. The demand side of the market is being quietly re-armed while the supply side (see the Construction PMI, see Rightmove, see Vistry) disarms. You don't need a crystal ball to see where that goes over a five-year view, and if you hold the assets, it goes there in your favour. Whether that's good policy is a different question, and my answer would be no.
Theme 3: What 4.5 times income actually costs
The Summary: BuiltPlace's contextual analysis alongside the FSR chart translates the leverage into repayment burdens. A mortgage at 4.5 times income implies repayments of approximately 29% of gross income at a 4.8% mortgage rate on a 30-year term, or around 26% of gross income if the term is extended to 40 years. For comparison, UK Finance data shows the average repayment burden for first-time buyers was 21.9% of income in 2025, up from 16.7% in 2020 - a rise of more than five percentage points in five years, driven by the combination of higher prices and the step-change in mortgage rates. The implication is that the marginal high-LTI borrower in 2026 is committing a share of income towards the top of the post-financial-crisis range, and that term extension - the shift towards 35- and 40-year mortgages - has become the primary mechanism by which monthly affordability is maintained at current price and rate levels.
The Propenomix Perspective: The 40-year term is the tell. When the only way the sums work is to stretch the repayment schedule into the borrower's late sixties, the honest description is that we have converted an affordability problem into a duration problem and declared victory. 16.7% to 21.9% of income in five years is a brutal deterioration in what a first home costs to carry - and yet, and I want to be fair here, 21.9% is still historically survivable; plenty of 1980s buyers carried far worse at far higher nominal rates, albeit with inflation eroding their debt much faster. The bit that concerns me is compositional: the buyer taking 4.5 times income over 40 years at 4.8% has almost no margin for the rate environment this Supplement has just spent four sections describing. If the one-year Bank Rate expectation at 4.25% is even half right, the 2026 cohort of stretched FTBs reprices in 2028-2031 into who-knows-what. Would I rather they rented from a professional landlord for two more years and bought with a margin of safety? On the numbers, perhaps - but nobody buys their first home on a spreadsheet, and the political economy runs entirely the other way. The system has decided that more leverage is the answer to unaffordability. History suggests checking the question.
Paper 3: UCL IIPP & NEF - What England Could Look Like With Rent Controls
And so to the report that set my LinkedIn feed alight this week, and which several of you had pinged to me before I'd finished my first caffeine infusion. The UCL Institute for Innovation and Public Purpose and the New Economics Foundation have published new modelling by Dr Beth Stratford on what rent controls would do to renters, landlords and the public finances - launched with Zack Polanski speaking at the event and quoting the results on the Today programme. Rent controls are the hottest of hot-button topics for this audience, so let's do what we always do: take the report seriously, on its own numbers, before deciding what we think.
Theme 1: The headline modelling - £1,300 a year, and who pays it
The Summary: Using data obtained from HMRC, the researchers model two illustrative rent control scenarios for England. In the first, private rents are reduced by 10% - which the authors note is equivalent to having frozen rents at May 2024 levels - saving the average renting household around £1,300 a year. In the second, rents are reduced by 20%, saving the average renting household around £2,400 a year. On the landlord side, the report estimates the 10% reduction would render 2.3% of individual landlords unprofitable, a figure the authors set against the 4.8% of landlords they calculate have already been made unprofitable by the combination of tax changes and interest rate rises since 2021 - the implication being that a two-year rent freeze would have done less damage to landlord profitability than policy and rates have already done. Under the 20% scenario, the report claims mortgaged landlords would still be making profits more than four times higher than the average UK business. Dr Stratford frames rent controls as one of the few policies capable of providing immediate relief to struggling households while boosting local economies and saving the government billions - the fiscal saving arriving via reduced housing support payments.
The Propenomix Perspective: Credit where due: this is a proper piece of modelling on real HMRC data, not a placard, and the "less damage than Section 24 and the rate cycle already did" framing is genuinely clever - it turns the sector's own complaints into evidence of its resilience. (I'm allowed to notice cleverness I disagree with.) But two things in the arithmetic deserve a harder look. First, "2.3% become unprofitable" measures an annual cash flow snapshot, not behaviour - a landlord doesn't wait for the P&L to hit zero before selling, they act on direction of travel, and the direction here would be unmistakable. The 4.8% already pushed underwater didn't sit still either; that cohort is a large part of the landlord exodus the RICS instructions data has been recording for years. Second, averages conceal the leverage distribution: the unlevered retiree with three paid-off terraces sails through a 10% cut; the 75% LTV portfolio operator - who houses a disproportionate share of tenants - does not. The £1,300 is real money for renters and I won't pretend otherwise. The question the model can't answer is how many rented homes still exist at year five to collect the saving in. Scotland ran a version of this experiment recently, and the re-let market's response was not encouraging - although I'd hedge that comparison, as the Scottish design was specific and much argued over.
Theme 2: The "landlords are fine" evidence base
The Summary: The report's supporting argument is that landlord profitability remains robust by comparison with the wider economy: the authors' analysis shows landlords making substantially larger profits than other UK businesses even after the interest rate rises and tax changes of recent years. They further argue that widely predicted large-scale landlord exit following the 2022 rate increases has not materialised, citing Ministry of Housing, Communities and Local Government stock data in support - the private rented sector, on this reading, has proven resilient to profit compression, and fears of supply destruction under rent controls are correspondingly overstated. Molly Harris, senior researcher at NEF, describes the work as an important contribution to the evidence base on rent regulation. The report positions the findings against the standard economic objection to rent controls - that they reduce supply and degrade quality over time - by arguing that the sector's demonstrated capacity to absorb cost shocks undermines the assumption that landlords operate at the margin of viability.
The Propenomix Perspective: Here is where the report and I part company on the data. "The exit hasn't happened" depends entirely on which series you look at and when you stop the clock. Chris Watkin's portal data - actual homes, actual weeks - has rental stock at 315k against a demand backdrop that RICS this very week scores at +18 and rising, and JLL's figures show London's PRS shrinking 6% in the latest annual data. Aggregate national stock counts flatter the picture because BTR completions at £1,800 a month replace exited stock at £900 a month and the spreadsheet calls it even. On profitability versus "the average UK business": comparing a capital-intensive, leveraged asset business to the average of an economy full of labour-intensive services tells you about capital intensity, not fairness - nobody runs the same comparison for farming or car parks. And the four-times-profits claim under a 20% cut needs its gearing assumptions published before I'd lean on it. I'd note my bias openly, as ever: I own the assets this report proposes to reprice, so discount me accordingly. But I've also spent fifteen years watching policies designed around static landlord behaviour collide with actual landlord behaviour, and the collision has a consistent winner. I’ve said it a whole number of times as well - it isn’t just the existing units that get sold, it’s the future units that just don’t get delivered in the first place. Hard to model, but this is the theme that recurs in every rent control study I’ve ever read (e.g. It’s great in Berlin for existing tenants, but for tenants over the next 10 years - they just can’t get a rental).
Theme 3: The endgame - a managed transfer, and the strange overlap with my own argument
The Summary: The report's most striking passage is its framing of the destination. Dr Stratford argues that well-designed rent controls, combined with the right fiscal and legal framework, create what she calls a historic opportunity: a managed transfer of homes out of the insecure and unaffordable private rented sector and into home ownership, or into secure and permanently affordable ownership by councils, housing associations and community-led organisations. Rent controls, on this account, are not merely a price intervention but a transition mechanism - compressing private landlord returns in order to induce orderly disposal of stock towards owner-occupiers and the social sector, while protecting tenants during the transition. The political context is live: the report launched with the Green Party leader's endorsement in the same week the Labour leadership transition reaches its conclusion, and rent regulation has long-standing advocates on the left of the incoming government's electoral coalition, including - in earlier Greater Manchester incarnations - the incoming Prime Minister himself.
The Propenomix Perspective: Read that endgame again, because regular readers should recognise the shape of it. A fortnight ago I argued the sustainable answer to the PRS's dysfunctions is the state rebuilding a public balance sheet of housing assets - buying stock from willing landlord sellers at 85 to 90p in the pound - rather than fighting a war of attrition against the sector. Stratford and I are, improbably, pointing at the same destination: fewer households dependent on private landlords, more secure social and owner-occupied tenure. The entire disagreement is the mechanism, and the mechanism is everything. Her version compresses returns until landlords sell under duress, which means the transition is funded by expropriating one cohort's capital and the stock arrives distressed, with the least resilient tenants enduring the shrinkage years. Mine pays a visible discount for voluntary disposal, which costs the Treasury money up front but keeps the homes tenanted and the sellers cooperative. Combat versus commerce, again - and I said two weeks ago that combat is ideological idiocy, so I can hardly complain that someone has now written the combat playbook properly. Would a Miliband Treasury reach for this? The fiscal-savings framing (billions off the housing support bill) is precision-tooled for a chancellor hunting headroom, and that worries me more than the Polanski endorsement does. The £64k question is whether the incoming government wants the PRS transitioned or punished. Those produce very different half-decades - and I'm honestly not sure the authors of this report, or the incoming Cabinet, have decided which one they want.
Paper 4: Shelter & Savills - wiping the slate on council housing debt
And so to the report that connects straight back to the Burnham housing Deep Dive of a fortnight ago. Shelter commissioned Savills' Affordable Housing Consultancy - and pause on that pairing for a second, the homelessness charity and the poshest name in property advisory, jointly doing balance-sheet surgery - to examine the debt sitting on councils' Housing Revenue Accounts, and what writing it off would buy.
Theme 1: How the 2012 settlement broke
The Summary: Housing Revenue Accounts are, in effect, councils' landlord accounts, ring-fencing the income and expenditure of council housing. The 2012 HRA self-financing settlement transferred around £29bn of debt to local authorities in exchange for their keeping future rental income - a deal premised on assumptions about rent trajectories and cost inflation. The report finds those assumptions have been fundamentally undermined by successive policy changes and adverse market movements: government-imposed rent reductions (the 1% annual cuts of 2016-2020), enlarged Right to Buy discounts stripping stock, new regulatory and safety standards adding cost, and general inflation. HRA debt has consequently risen to approximately £31.8bn - higher than the original settlement despite thirteen years of repayments - and the report concludes that current debt levels now significantly inhibit councils' ability to invest in existing stock and, critically, to build new social rent homes at scale. Savills' conclusion is stark: only large-scale or full write-off of HRA debt restores the capacity to both maintain existing homes and build at volume.
The Propenomix Perspective: The 2012 settlement is one of those stories that tells you everything about how Britain does housing policy: a sensible-sounding deal, struck in good faith, then unilaterally rewritten by the same central government four years later when George Osborne needed a headline rent cut, leaving councils holding debt priced against income streams Westminster had just legislated away. If a private landlord's lender behaved like that, we'd call it what it is. So I have some sympathy with the write-off case on pure fairness grounds - the debtor didn't break the deal, the creditor did. The harder question is moral hazard and optics: £31.8bn of forgiveness lands on the national balance sheet somewhere (it doesn't vanish, whatever the framing), and it lands in the same fiscal year that our new chancellor, whoever they are, is staring at £11.7bn monthly debt interest. Hold that tension, because Theme 3 is where I try to resolve it.
Theme 2: The write-off arithmetic
The Summary: The report's central exchange rate: per £1bn of HRA debt written off, around 8,900 new social rent homes could be delivered. Scaled nationally, this equates to roughly 190,000 to 280,000-plus social rent homes depending on the scale of the write-off. The mechanism is capacity restoration - removing debt service frees revenue headroom and borrowing capacity within the ring-fenced accounts. The report is explicit about the limits: borrowing alone can never cover the full cost of delivery given current development and construction costs, so the additional homes also require subsidy from grant funding, Section 106 contributions, or cross-subsidy from within the HRA (the last necessarily constrained by existing stock obligations). For calibration against current policy, the CPS published analysis this week arguing the government's £39bn social housing commitment may deliver only 14,335 to 15,494 homes per year - while the London Assembly's Affordable Housing Monitor reported the 2021-26 AHP achieved 14,335 affordable starts against a target of 17,800 to 19,000, with 32,081 funded homes started but not yet completed under the previous programme.
The Propenomix Perspective: £1bn per 8,900 homes is about £112k of forgiven debt per home delivered, before the additional subsidy the report honestly concedes is still needed - so call it materially more per completed front door in true cost. Is that good value? Set against the CPS numbers on the £39bn programme (which shake out at £2.5m-odd per annual home if you take their figures at face value, though I suspect that comparison mixes stock and flow unfairly and I'd want to see the workings on both sides), the write-off route looks almost embarrassingly efficient. And that's the pattern I keep finding whenever anyone prices these things honestly: buying capacity in the existing system beats building institutions from scratch. The Shelter number from three weeks back - 119 years to clear the social waiting list at current delivery rates - is the backdrop against which 190,000 to 280,000 homes should be read. It doesn't solve the queue. It makes a visible dent in the queue, at a cost the Treasury could describe as a balance-sheet reclassification rather than spending, if it were feeling creative. Chancellors have been creative with far worse.
Theme 3: The balance-sheet question - and the case I keep making
The Summary: The report's underlying framework treats council housing as a national asset class whose productive capacity is impaired by legacy liabilities, and debt relief as an investment in supply rather than a bailout. This aligns with a broader policy conversation gathering pace around the incoming administration: Andy Burnham's housing platform, covered in this Supplement a fortnight ago, contemplates a substantially larger social sector as the structural answer to the private rental market's dysfunctions, with ideas in circulation including voluntary acquisition of private rented stock and reform of local authority financial capacity. The Shelter/Savills work supplies the missing accounting layer for that agenda: it quantifies what restoring council balance sheets would cost and yield. The counter-position, represented this week by the CPS, holds that social housing subsidy at current unit costs represents poor value for taxpayers and that the burden of the £39bn commitment will exceed its delivery. The choice facing the new government is thus framed: repair the public balance sheet to build and hold housing assets, or contain fiscal exposure and rely on the private market plus targeted subsidy.
The Propenomix Perspective: Regular readers know where I stand, because I laid it out two weeks ago: combat, not collaboration, between the state and the private rental sector is ideological idiocy, and the grown-up version of this policy is the state rebuilding a public balance sheet of net housing assets - including, where willing sellers exist, buying back private rented stock at 85 to 90p in the pound rather than fighting a war of attrition against the landlords who currently house the people the state cannot. The HRA write-off is the same idea wearing accountancy clothes: you are converting a gross liability into productive capacity, and the asset side of the ledger (2.4 million council homes and the land under them) dwarfs the £31.8bn being agonised over. A household with that balance sheet would refinance without blinking. Would the gilt market wear it? That's the honest constraint, and after this week's moves I won't pretend it's a small one - timing matters, sequencing matters, and announcing £30bn of debt forgiveness in the same breath as a Miliband appointment would be asking for trouble. But done credibly, over a parliament, scored as asset acquisition rather than current spending? I suspect the market would care far less than the politicians fear. It usually does when there's an asset on the other side. Whether anyone in the incoming Treasury team - whoever ends up holding the red box - has the patience for boring, sequenced, asset-backed policy is, I'll admit, the part I'd hedge hardest.
Wrapping up
As we get towards the end for this week - the workshop diary now points at Manchester in October, and the subject is Joint Ventures and M&A with Rod Turner and myself. Partnering structures, buying portfolios and businesses rather than one-house-at-a-time, due diligence on people (the hardest kind), and the deal anatomy that separates the JVs that compound from the JVs that combust. If the themes of this week's Supplement resonate - a market rewarding the professional and repricing the amateur - then this workshop is squarely for you. Get your name down: tinyurl.com/pbwoct26 - Super Early Bird discounts of 20%+ are there, they are genuine, and the VIP dinner tickets are selling especially quickly this time around and are in limited supply.
Above all - please remember to Keep Calm, ALWAYS listen to or read the Supplement, and Carry On. A new Prime Minister within the week, a new chancellor shortly after, a gilt market marking the homework in real time - and underneath all of it, the fundamentals haven't changed one bit. Not enough of the right homes, in the right places, at the right price; a construction sector going backwards; credit quietly loosening; and a professional's market for anyone patient enough to price properly and hold through the noise. Investing in property is not a guaranteed win, and this year is asking harder questions than most. But the people who keep their heads while Westminster loses its own tend to look rather clever by 2030. KCCO!