Supplement 04 May 25 - Go or no go

"It doesn’t matter how slowly you go as long as you do not stop” - Confucius, quote GOAT

This week’s quote is proven to be deliberately provocative - is this about leaving the country? Are we going to do a “Rob Less” or whatever his name is, pretend to leave, say we are leaving 6 times, have 6 “last ever” courses in the UK, then go for a long holiday and come back? Does anyone care, or even know what I’m talking about? Or is it about defecting on any political allegiances that might be long-standing, and joining “the new way” - solely because it is maybe better than the alternatives, because the alternatives are all absolutely woeful at this time? 

Or - is it about leaving the industry altogether? Renters’ Rights (blimey, if I see one more person put the apostrophe in the wrong place, I might need resuscitation - no apostrophe is better than an incorrect one, if you struggle with that sort of stuff) - EPCs - on top of an overloaded camel’s back? You, dear reader or listener, can decide. After those searching questions - Rod and I are running another workshop in July, on Thursday 3rd - Joint Ventures and Mergers and Acquisitions this time around, and it is sure to be a highly popular one - a whistle stop of the agenda:

Market dynamics, JV opportunities, and optimal legal structuring for property businesses. Learn the pros and cons of limited companies, share classes, shareholder agreements, and sustainable JV models. Dive into capital structuring, comparing debt vs equity, managing risk, and understanding personal guarantees. Gain insight into property M&A, from due diligence to asset vs share purchases. Apply concepts through two in-depth case studies: acquiring an asset-backed property company and navigating a distressed business sale. Understand strategic disposals, company wind-ups, and how to negotiate under pressure while maximising value. Don’t miss the SUPER early bird tickets - now online and already selling like hot cross buns at http://bit.ly/pbwseven 

Welcome to the Supplement - business as usual this week before one more Bank Holiday. No-one complains (well maybe the odd business owner) while the weather is like this. I do note the Monday forecast is for rain, though…….The stock market continues to pretend like tariffs won’t really happen although the shifts in how confident the world looks in the US, from a global capital perspective - look more substantive. I’d be very surprised if Trump is just rolling over, so the market looks overconfident to me - let’s see and that isn’t a “this week” problem seems to be the attitude that the market is taking. 

Deep dive wise - we are going to take a look at a Savills report about the housing “challenge” as they prefer to call it - and also a peek at Shelter’s briefing about the future trends in temporary accommodation, in a continuation of April’s efforts. I’m going to include a peek at the MHCLG data on statutory homelessness as well.

Straight into the Real time property market then thanks - as always - to Mr Christopher Watkin’s efforts for the week. Here comes that question that we simply have to know the answer to - What is currently happening in the UK property market?

After week 16 of 2025 (remember we run 1 week behind, but it is as close to real time as we get!) - and we see the listings data pressing forward - 2025 still remains the biggest start to the year for listings since 2015, we are told. Now we’ve had our late Easter the 25/24 gap has narrowed - but we still have 15.7% more listings than the 9-year average, 6% more than the equivalent YTD in 2024, and 9% YTD ahead of the pre-pandemic market. My proxy data snippet to remember for context - “10% more stock than normal”. 32.5k new listings in spite of Easter Monday. The train is rolling.

13.4% of stock was reduced again - compared to 2024’s average (a market of more stock than we’ve been used to, just as 2025 is shaping up) of 12.1%, although the 5-year average is 10.6% for reductions. More stock, more reductions (both in percentage and absolute terms). Another week with twenty thousand plus price reductions around the country! In a bull market like 2021/2022 - the numbers were 11,909 and 8,374 accordingly - in a normal market like 2017-18 they were not much higher than that, 11,584 and 13,767.

Sales are a bit lower but remember Easter Monday features in this week of data. Taking that into account - all looks pretty healthy. 22.8K went to SSTC status. 11% better than 2024 YTD, and 19% higher than the pre-pandemic market. No real slowdown signs though - just a week with a Bank Holiday in it. Plenty of business being done. 

Fall-throughs were at 23.6%, so below the 7-year average but only just. Net sales therefore (gross sales minus fall-throughs) still look good and are way ahead of 2024 (10%) and the pre-pandemic market (14%). The March number - as a whole - was that 5.75% of sales in pipelines fell through. This compared to 5.36% in 2024. The stamp cliff did “a bit” - 7% up on last year - but only a bit. We also didn’t hear about a bloodbath of deals falling through due to conveyancing - perhaps the industry did a decent job, and no-one ever praises them? Not sure.

I always give Chris a weekly shout out here because he’s more prolific than “just” this epic tome he releases weekly on the UK property market - he comes up with some great stats on a regular basis. Drop him a like, subscribe, and all the rest of it and some kind words for his content creation. If you are in the industry and want support in growing your business or to be a more effective communicator/be more in touch with your local market - that’s his core business - give him a shout. The article gets published on the Property Industry Eye website, and the video on his YouTube channel - @christopherwatkin

Macro time, and there’s a variety. Nationwide House Prices. The Bank of England Money and Credit report. I have to squeeze in local elections here - from an unbiased data perspective with a navel-gaze as to “what would the Reform future look like” - because those not considering it are in denial, frankly. That leaves our contractually obliged space for the gilts and swaps, of course.

Nationwide - and their own prediction came true. A haircut in the market for April - nothing extreme, but a drop of 0.6% month-to-month. This looks remarkably sensible for a stamp duty cliff - Total cost of a property is up about 0.8% from March, on average (£2,500 extra stamp on £300k - very rough figures - and not applicable to FTBs etc. etc). So, the vendors eating some of that makes sense. It’s nowhere near as scientific as that though. It is one month. There’s not much to see here I don’t think. That puts the Nationwide annual figure to 3.4%. There were plenty of transactions - but we are talking 108250, compared to 150k+ in every stamp duty cliff since 2015 (and over 200k in the month when the main Covid stamp holiday came to an end). We were bumping in the 90k-100k region in the build-up, and my expectation would be 90-100k on a busier month in the calendar in this sort of market anyway - so there was no major distortion.

My post-mortem there would be that the national attitude was “quick, we can save a bit - we love a bargain” - rather than “my God there’s a huge incentive to save big lumps of cash here”. That’s the sense I get from the data. 

The overall chatter - low unemployment, earnings rising in real terms (2%ish on the official figures above inflation), balance sheets are strong and borrowing costs should moderate - swap rates have moderated in recent weeks. Agree with all of that - very sanguine.

Onto the Bank of England Money and Credit Report. Each month, the media mostly focuses on the number of mortgage approvals. This is a good real-time indicator of the health of the market - and bear in mind only the deeply unrealistic would have expected a mortgage approved in March to complete by March 31st. So - this should be an honest number.

As usual - we go deeper. The net amount borrowed was up gigantically - to £13 billion. For context, this has been bumping around the £2bn-£3bn mark for some months, and indeed was net repayment in February. The huge, outsized increase - the SDLT deadline, of course. 

This is confusing. Not LOADS more completions according to the data already analysed, but a gigantic increase in net borrowing. Well - perhaps the deadline was much more important for first time buyers, and they pushed very very hard - remember their pain was between 300k and 425k and their incentive to save - rather than being 2.5k - was up to £6,250. You might argue they are more likely to be short of money than second steppers as well, and I think that argument would have merit. So - when there is data available to break it back - we’d expect to see all of the surge in March transactions explained by first-time-buyer transactions at high leverage.

Approvals for mortgages in March - 64,300 - and we will expect April’s number to fall again there. That was a tiny fall of 800 approvals from February. No major bloodletting will occur from this stamp cliff. Remortgages were up by 1000 to 33,400 (we’ve been bumping around 30k for some time, so we are now 10%+ off that yardstick). 

Credit card borrowing decreased on the month significantly - “only” £200m. This was the lowest figure since April 2024 and snapped off a recent trend I'd identified of outsized credit card balance growth. 

Bank and building society balances were up £7.4bn in a typical end of tax year “swell”. The money supply also hit a new high (although we are only just above Sept/Oct 2022, still) - meaning inflation is unlikely to be dissipating at pace, as I’ve been saying for - well - YEARS, now!

Let’s not get too excited by a “cliff” month, but those figures are pretty healthy - particularly the ongoing mortgage approvals. Let’s see if in April we dipped below 60k approvals when we appraise that report next month - but the bump looks exactly like a bump at the moment when we consider the SDLT changes, not a cliff or a precipice.

Local elections, then. Lots of propaganda and no real context given. I shouldn’t have to do this, I always feel, but then I always have to. Firstly - you might not know all of the detail. I didn’t. About 4,500 councillors are elected by “thirds” - that’s what happens where I live. One third of the council is up for election each year - everyone is on a 4-year cycle - on the 4th year, there’s no election. 

About 11,000 are elected by “whole council” - it’s out with the old, in with the new, every 4 years. There’s some continuity of course, almost always. Then there’s elections by halves - only covering 300 seats - half elected every 2 years, every other year off.

So. Of that 15,800, only 1,641 were contested on 1st May. About 10%. Reform won 41% of them. The most bullish projection puts their share of a national vote at 32% (Labour won a huge majority at 33% of the vote, remember, in 2024). That seems high and unlikely, because no polls have had them anywhere near that yet - although they have been in front. 

The press has focused mostly on an embarrassment for Labour - they lost 2/3rd of the seats they had. So did the Tories - who had a lot more seats to lose, this time out. The Lib Dems did well and are a “close fourth” - close enough to be a thorn in the side, that’s for sure. 

There’s speculation that “first past the post is all over” - seemingly ignoring last year’s election result - and what I know is something I’ve known for some months - a Reform government under our system is a real possibility. 

Now - I was very, very worried before the 2024 election. Their fag packet economic manifesto looked like biscuits, to me - and I mean disco biscuits. Way way worse than Liz Truss. I’ve said as much. However - their defence to that scrap of paper is that (in typical political chat) - that was their long-term plan, NOT their day one plan. Thank goodness for that. The one major point that still worries me more than any other is that they insist on a belief that the UK economy can grow at 3%-5% per year, and that plan isn’t credible and won’t persuade any bond markets. As we know from recent experience - EVERYONE is owned by the bond markets - even Trump. 

However - what were their higher level plans? No tax under 20k of earnings. Helps the lowest paid for sure. Hugely expensive, but OK - some serious shifting to be done. IHT to £2m threshold. SDLT abolished below 750k. Corp tax back to 20%, and down to 15% in year 3. Scrap IR35. Massive reductions in working age benefits, net zero subsidies, and foreign aid (already raided for defence, of course). Their biggest issue that remains, I’d think, is Farage’s view around NHS reform and insurance-based systems. Most pensioners, who are of course outsized users of the NHS, don’t realise quite how much they cost the NHS as a whole - but the communication and incidence of any of these plans will be hugely important as that’s the one major point that I still see derailing a Reform campaign - a landmine to be addressed.

Now remember - populists promise things they can’t do. That’s WHAT they do. That’s how they get elected. However, as evidenced by Trump - they can also continue telling abject lies (gas is down to $1.98 a gallon apparently, even though there’s nowhere in the US that’s sold any below about $2.50) and get away with it to their supporter base - although his approval ratings are not great at the moment. Still - I think we need to be aware of what will happen if they DO win the next election, as that’s a question I’m already asking myself (I’m a long-term thinker, remember?)

SDLT off on houses under 750k - that would be some move. Freeing up the market massively. Remember, the deputy leader (Richard Tice) is a property man through and through, and so is unlikely to hurt the market. For social housing there would be prioritization for British Nationals, and “British Homes for British Workers” - but that’s not about building MORE. That’s about reallocation. Fast-tracking brownfield development - could be a good idea, depending on contamination of course - and incentivizing innovation - whatever that means. 

So my main concern here purely from an economic viewpoint? What happens to the base rate, the gilt yields and the resulting swap rates? We will see more as we approach the next election - IF the country is still in the same political limbo as it is today, or Farage can keep this sort of momentum going for the next 4 years (and that’s some task - he will be exhausted) - what will the bond markets do in the run-up. This time around, there will be a much more “proper” manifesto needed, that’s actually costed (you’d hope) and not with silly comments like “take the money from the commercial bank deposits at the Bank of England”. There WAS and IS a few billion quid to be liberated there, but not 40 billion - not without punishing savers and borrowers accordingly (or taxing them in another way, basically). Time will tell, but “event horizon/bloodbath”, which is what I feared, looks less likely. I would highly recommend anyone listens to the Reform Chair - Zia Yusuf - being interviewed by Peston and McGovern on the “Rest is Money” podcast - his chat around 3%-5% is puffery, but then politics is - but he’s a very measured, successful, and calm individual. It removed a reasonable amount of my “Reform anxiety”, or whatever you want to call it, anyway. 

OK - quite a segue, but I couldn’t let the “Reform-quake” or whatever you want to call it go undiscussed. Back to BAU - the gilts and swaps. Open on the 5 year gilt yield this week - 3.983% - close at 3.995%. No movement to report - decay to under 3.90% during the week with a rise in the yield on Friday afternoon to the close. That was all sponsored by great jobs numbers coming out of the US, which were unexpected. 

Thursday’s close at 3.954% corresponded to a swap yield of 3.601%. Lowest for SOME time, and the 35bps still being observed in terms of the discount. Very nice. Long may it last. Can we confidently predict 5.5% no-fee rates particularly soon? No - but they are possible. I suspect the discount will start to wane soon because demand will pick up at these lower rates, as people get tempted back to the property market due to what rents have done, with these improved yields.

I had cause to shout on Facebook this week. I try not to - but if I see another post from someone who has sold up before considering what they are going to do with the money, I’m going to have to. If exiting - for goodness sake, make your investment plans up front, not when you sell the property? So many are realising that they have a 4% rate if they are lucky, subject to income tax, that’s waning at the moment for a time deposit - with inflation at 3% and net returns equalling 3.2% total, or 2.4% total, or even worse if you are an additional rate taxpayer. Net loser. It beggars belief. Rant over. 

So - the rates overall look to be improving for the borrowers. The Bank of England meets next week and are huge odds-on to cut to 4.25%. They will. I’m going to predict 2 votes for a 0.5% cut. That’s the metric I’m really watching. How many 0.5%ers? We will see. 

OK. Masks on. Time to dive deep. Firstly, I’m going to kick off with the MHCLG numbers on statutory homelessness. The report, published at the end of April on the gov.uk website, is very positively spun. The number of households owed a duty to prevent/relieve homelessness was at a record level at the beginning of 2024 - and has reduced each quarter since then, we are told. The proportion securing accommodation has also increased since the start of 2024. So - we hit the pandemic - or government, you decide - sponsored low at the turn of 2024. 

Then the reality. The number of families in temporary continues to rise and is at record levels, BUT the number of families in B&Bs has been falling for the last 3 quarters, as have the numbers being over the 6-week statutory limit. Now I don’t want to be too cynical. There’s nearly no political capital here - this really does look like trying to do the right thing. The alternative interpretation is that the government knows there’s “nothing they can do” - read, nothing they can think through or that is politically palatable - about the rising number in temporary accommodation - but they CAN sort the B&B situation out and try to take political credit from it on question time, Kuenssberg etc. 

So the numbers - from Q4 2024:

83,800 assessed as homeless or threatened with homeless and owed a statutory duty - 76,820 of them were assessed as being owed a duty (so a “gap” there of nearly 7,000 people per quarter, who then have to do “something else” - sleep rough, sofa surf, you tell me?)

34,010 were assessed as being owed a prevention duty - down 2.7% from Q4 2023 (so not a lot), 5,820 thanks to a section 21 (which some fools likely believe will disappear after RRB, but it won’t of course). 

42,810 were assessed as homeless and owed a relief duty, 17,690 were accepted as owed a main homelessness duty (which was up 9.3% on the year before, but apparently we even allow government website summaries of the facts to have a political bias to them these days, which is very sad). 

As at NYE 2024, 127890 households were in temporary accommodation. 13.6% up. 13.7% increase in households with children (81,060) and adult-only were up 13.3%. This week’s image you might find illuminating as it shows, by percentage, the circumstances (and in some parts, causes - although these are often confused and misprescribed) of homelessness as currently defined (i.e. no fixed abode, council has a duty to house, but not to be confused with rough sleeping). 

OK. Plenty to think about there in terms of context, I’m sure you will agree. It leads me to the Shelter briefing that was also published this week around future trends in temporary accommodation. 

TA is costing £6m per day - we know about the £2.3bn figure. My view is that nothing serious will be done until this gets to £4bn-£5bn, which it likely will do before 2030. Shelter focuses on the point that this is bankrupting local authorities, which is widely accepted. The number that Shelter focuses on is the delivery of 90k social rent homes over 10 years to end the housing emergency, as they prefer to term it.

They are predicting: 26% more children in temporary by 2029 - this looks like a low prediction based on current numbers. 44% more households - well, at 13.6% per year, again that looks low, as the trends aren’t falling away incredibly quickly, and new stock is at a cycle low during 2025 and 2026 looks reasonably grim before planning reforms kick in (particularly if all new homes now need solar panels from 2027 - another 4k increase to each unit built, plus inflation - and tariffs). They also predict TA costs up to £3.9bn by 2029, which isn’t far off where I’m at with it. 

There’s their weakest conclusion for some time as well about the abolition of s21, now it is on the hill - “although ending section 21 evictions SHOULD limit the flow of people into temporary accommodation, the lack of social housing and unaffordable private rents, if unaddressed, could continue to drive up homelessness”. The emphasis is mine. SHOULD? I thought this was a guarantee? I thought it was all the fault of section 21, and therefore the landlords, no?

And - aside from that - COULD continue to drive up homelessness? It’s a guarantee, but as usual, they don’t want to address the root causes. They want to treat symptoms, not causes, and medicate with more social housing. 

They are calling for more spending on social homes in June’s spending review. They aren’t wrong to do this. If this Government wants to get anywhere near their targets, they MUST put the money into social homes, because the private sector will do what the private sector does, and it will build less if solar is needed on every home. 

Only 29% in 2022/23 of those in temporary accommodation were able to move into a social let. That makes a temporary to social let lifecycle almost as long as a typical private rental sector tenancy - how ridiculous! The councils do, of course, support people from temporary into PRS tenancies too, with guaranteed bonds and first month's rent and all sorts of incentives - but that gets harder every year of course.

Shelter also, lower down in the report, admit that insufficient LHA is part of the problem. They cite the crisis report I reported on a couple of weeks back - only 2.5% of private rental properties listed are affordable under LHA. I can tell you from looking at the market very regularly that more than 2.5% of what’s listed are of a low standard.

In the past 5 years, privately managed TA has increased by 4.8 times (a 375% increase). The B&B spend, far more emotive, is up 110%. Those numbers - if they don’t make you sit up and take notice - are truly eye-watering in more ways than one. 

Onto the other end of the pendulum then - Savills recent publication about England’s Housing Challenge. 

They summarise the last 3 years - which won’t be a bad proxy for the next 3 years, as it goes, because 2025 is likely the “bottom”, with 2026 not looking LOADS better - but then 2027 potentially bringing significant improvement (the solar panel rules will affect delivery and viability once more, though). Net additional dwellings have averaged just under 230k, so 70k short of 300k/p.a. Or 1.5m every 5 years, and 350k short of the 5-year target.

Savs instead believe that the next 3 years will be worse, because of the fall in the number of sales (I’m not sure comparing anything to what happened in 2021 is a good idea, personally, so that really should be absolute analysis rather than relative analysis to be meaningful). -26% in the past 3 years is the figure they prefer, anyway.

They press for lifting affordability barriers and restrictions on mortgage lending - because they know now is the time to make that call and lift the brakes on the housing market. The current new build delivery breaks back as 66% sold on the open market, 27% affordable, and 7% purpose-built rental (PBSA, BTR, SFH). 

The OBR has forecast housing transactions moving from 290k per quarter (end 2024) to 370k per quarter by 2029. This is based on planning reform and increased housebuilding - but Savs take issue with this, because demand is not equal to supply (although supply via new houses tends to flex to modelled demand). Savs point is that the demand side is even more important - which I’d agree with.

Their seminal point is a 10:1 constant ratio between numbers of private market transactions and housing starts for most of the past 35 years, if you ignore the distortion caused by help to buy. The argument would be - if you see the transactions happening, you can start new builds “safely”. 

The 2024 number for private housebuilders - who have accounted for 77% of new build starts in the past 5 years - was 0.6 sales per outlet per week. This is a key metric for the housebuilders - way back when, the expectation was 1 sale per outlet per week. However, this is about par for the “new world”. The Q1 2025 figures from 3 housebuilders are in line with this number. This is better than 2023, but 15% down on the 2017-19 market which is so often used as the “normal times”, the pre-pandemic proxy (I don’t argue with this approach - I think it is the least worst, and the market 2017-19 was largely unremarkable as a whole/as dictated to by macro events). 

The annual rolling number of starts at this time by private housebuilders is just under 80,000 (78,010) at the end of 2024. If that’s 77% of delivery - you can do the maths quite easily. It looks bad for the finished product/housing completions for 2025, as I’ve said. Savs see this as increasing to c. 110k new private starts per year by 2029, but again that’s way way short unless social delivery is moving up very rapidly indeed.

Their next point is one that’s made across the board and we’ve observed in the Supplement for at least 12 months now - the North/South divide. Their framing: The local authorities who have seen a 10%+ dropoff in first time buyer activity in the past 10 years have an average price to income ratio of 13.31 - the local authorities who have seen 10%+ movements upwards have an average price to income ratio of 8.05. The reasoning is seen as the restriction under responsible lending rules introduced in 2014 - meaning larger deposits and less ability to move. 

The next part I quote directly - this is the push from the industry, and the key to unlocking faster house price increases: “The Financial Conduct Authority stated at the start of the year in a letter to the Prime Minister that it would “begin simplifying responsible lending and advice rules for mortgages, supporting home ownership and opening a discussion on the balance between access to lending and levels of defaults.” Options could include reviewing how much first-time buyers are allowed to borrow and enabling lenders to issue more loans to customers with smaller deposits.”

Currently, no more than 15% of loans can be at >90% LTV, per lender. This could move, of course. The next suggestion is more targeted support for new build sales in areas where transactions have tanked - sounds politically less likely as that just means “London” - but if anyone is likely to do that, the Labour party are the ones. 

Savs report a positive institutional market, however. 63% of UK investors are looking for greater investment in multifamily - and 52% in the single family suburban market. The UK is the highest priority market for European based investors too. 

The indicators are there for £23bn to be invested over the next 3 years in Living in the UK, versus £14bn over 2022-24. Mostly forward funded development, which has been 75-85% of all BTR investment over the past 3 years as there’s limited operational stock available to trade.

Affordable averages 56k homes per year, 50/50 between grant funded and nil grant s106. Thus - increasing this is absolutely key - which I think everyone across the board agrees with - otherwise there’s just no chance at all of making a dent in the deficit to the target. The £2bn of funding announced for 2026-27 is just the continuation of the current affordable homes programme, and isn’t “new money” compared to the status quo. Without more money announced, all we are getting is a contraction. 

Non-grant funded delivery has £14.8bn of investment forecast - 5% below the previous quarter, and the lowest amount to be spent on new affordable housing since the start of the pandemic. At current times, without significant injections, the Savs forecast for 2029 is down to 40k affordable homes/year.

I’ve said this in far less eloquent terms - we need tens, and really £100bn or more, to be injected into the sector - and we are messing around at £2bn/year. There’s no real appetite to make a difference unless this money gets a really major league shot in the arm come June at the spending review.

Savs are, ultimately, forecasting around 205k new homes per year for the next 5 years as an average. So - the conclusions are clear - either (or both) - take the brakes off the mortgage lending regulations, mostly biased towards first time buyers, or whack a ton more money into affordable/social. I can’t pick any holes in the conclusions, even if I have made a few pedantic points around the outskirts - this all reads very well to me and appears accurate - and it seems a fair summary.

As we come to conclusion once more, remember to book your tickets for Thursday 3rd July for the next Property Business Workshop too, on Joint Ventures and Mergers & Acquisitions - another fabulous day of learning and discussion is guaranteed! Get those SUPER EARLY BIRD tickets here: http://bit.ly/pbwseven  

Above all - please remember to Keep Calm, ALWAYS listen to or read the Supplement, and Carry On; there will be opportunities abound this year and towards 2030 - the risks around at this time, while they feel significant (the geopolitical ones) are far less meaningful to the UK housing market than they have been for several years - of that I have no doubt. Good luck!