July 3, 2025 • 21 mins
Just a few months ago, the UK housing market seemed to be finding its footing. That hope has since faded. In June, house prices fell to their lowest rate in over two years, according to new figures from Nationwide Building Society. This surprised economists who had been expecting a small uptick. The decline follows the government’s April decision to raise transaction taxes—a move that’s added to the burden for buyers already grappling with high borrowing costs.
On this week’s In the City, host Allegra Stratton is joined by Bloomberg Opinion columnist Marcus Ashworth and European real estate reporter Damian Shepherd to examine the UK housing market’s slowdown—and what might come next.
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio News. Welcome to in the City.
Each week we unpack a story that's crucial to the
world's financial capitals. I'm Allegra Stratton. So the UK housing
(00:26):
market has been under pressure for some time, but now
the data is catching up. In June, house prices recorded
their sharpest drop in more than two years. That's according
to Nationwide Building Society. The fall came as a surprise.
Economists had actually expected a small uptick. This latest decline
follows the government's move in April to raise transaction taxes.
(00:48):
It's a change that's made life even harder for buyers
already dealing with high borrowing costs. And if you zoom
in on the luxury end of the market, the picture
gets even bleaker. London's prime property, once a safe haven
for global capital, is in a drawn outslide. Prices are
now more than twenty percent below their peak, with no
(01:08):
real signs of a rebound.
Speaker 2 (01:11):
Welcome to the City of London, The.
Speaker 3 (01:13):
City of the City of London.
Speaker 1 (01:17):
Band we need mind the gap between and the financial
hearts of the country.
Speaker 3 (01:28):
The City, the City.
Speaker 2 (01:30):
Welcome to in the City, Clear of the doors.
Speaker 1 (01:36):
Peace. So in this episode, we want to dig into
what's driving this UK housing slow down and what it
might tell us about where we're all heading next. To
do this, I'm joined by Marcus Ashworth, who's a Bloomberg
opinion columnist, and Damian Shepherd, who's Bloomberg's European real estate reporter.
It's brilliant to have you both, hear Marcus, Let's just
(01:57):
start with you. There's nationwide numbers. As we said in
the intro, they expected it to be a one percent increase.
It ended up being a point eight percent decline. Is
it significant?
Speaker 2 (02:07):
We're all doom. It is significant. And firstly, I don't
believe that economists should try and estimate monthly housing numbers
because it's this point listly pointless and it shows you
by this myss that that really all you should be
doing is maybe a quarterly but really on an annual
basis where you guess it might be because the nature Onde
only looks at its own selection of mortgages, and it's
(02:29):
probably the most accurate in the context of a very
inaccurate field of competitors. And I just think that the
rush toulfill completions before the April deadline and the stamp
duty rose. It was only such a minor rise, it's
had such an outsize effect where really it's been the
most pointly bad economic decision I think from the Chancellor,
(02:50):
and it's created a vacuum and we're seeing the results
of that now whereby you just literally the whole markets
has opened up and we have nothing to show for
it because volumes and this is the whole point you need.
You need an active housing market, doesn't matter of price,
going down a price and going up, you need to
be able to transact. And because stamp duge is so
high at the top end, no one's downsizing because it's
ruinous for people though that she's got Hang on second,
(03:11):
I'm solding a four bedroom house and picking up a
two bitche and flat and I get nothing out of it,
so they don't. At the same time, I think to
increase charges on first time buyers and at the lower
end is just completely construe to what this government allegedly
is supposed to be about. Blah blah blah. This is
the price where I'm worry most about. It's not so
much where house prices will go, because they'll probably end
(03:32):
up higher because they're not building any so by definition
demand supply, but the lack of volume is seriously worrying.
Was it going to not the whole economy because it
hits everyone.
Speaker 1 (03:42):
So the couple of things you said there just to
pick up on before we bring Damien and so just
expand on your point about it's the lack of any transactions.
It's not really that our price is going up. Are
they going down? We completely take your point that they'll
probably end up going up in the end, but just
explain for the listeners why it's the sort of total
clogging up.
Speaker 2 (04:00):
Well, we just have had I think it's the worst
number for something like twenty years. It is money more
than twenty years. As far as monthly volumes for April,
we've yet to see May, but they're not likely to
be much better. It shows you your economy it's ground
to a halt, which means that your solicitors, your builders,
your plumbers, all the various ansillary trades, furniture supplies, you
(04:20):
name it. The whole lot is going to have a
knock on effect later in the year because the world
isn't churning it. And that is something which is you know,
because the costs of transaction are too high. They are
ruinously high. If you are a foreigner and buying a
second home in this country, it's nineteen one to nine
percent on top as a stand duty charge. I mean
it's just forget about it.
Speaker 1 (04:42):
But we don't want your tax.
Speaker 2 (04:43):
Yeah, it literally is, and that I let alone the
non domb stuff. So it's the reason why I'm sure
Dame will come onto it. High end London has collapsed
fifteen percent from Kensing and Chelsea in a year because
in price terms that volumes are non existent is because
everyone is trying to sell and then not are the
latest marginal seller and that is what's affecting everything.
Speaker 1 (05:04):
Neat segwe damien very neat.
Speaker 3 (05:06):
Indeed, I'm still kind of chuckling at your opener their
markets of we're all doomed, but if you speak to
the London brokers, they genuinely feel like they're doomed. Right now.
The top end of the market is in an absolute state.
I mean you mentioned they're let alone non doms. I
mean that is without question the biggest thing impacting the
five million pounds plus market. There's been debate around the
(05:28):
numbers of how many non doms are genuinely leaving. Chat
to the people selling those houses. They will tell you
this is very real, this is happening, and the knock
on effect on that side of the market is a
complete lack of demand because the people trying to ship
off their homes are trying to sell to people who
will come under the exact same issues as those trying
to leave the UK. It's leading to less transactions and
(05:50):
massive dip in prices. Price reductions are basically essential right
now if you want to get anywhere near selling your house.
There's one really really interesting case in Mayfair. Beautiful penthouse
went on the market for one hundred million pounds in
twenty twenty three, about six months ago, is knocked down
to eighty five million pounds. A few weeks ago it's
down to sixty eight million pounds. There's massive discounts going on.
(06:13):
It is as close as you can get to a
blood bath at the top at the moment.
Speaker 2 (06:17):
Yeah, it's not just the top unfortunately.
Speaker 1 (06:19):
So just let's stay at the top. Because the other
point that Marcus made that you would think they'd listen
to more in the treasury, because obviously we have to
assume that they're not. They're getting numbers that are telling
them they should be worried, but because of the politics
of the Labor Party, this is sort of their comfort zone.
I think all of us, all of us in this
room and people listening, will beg to differ. But I
think what we'll worry them is this point around ancillary services,
(06:42):
so the entertainment, the restaurants, around all of these houses
are where you have so many people in employment.
Speaker 3 (06:48):
Exactly, and I mean it's completely across the board. I
mean you've got to look at the geopolitical tensions as
well as another risk factor for the top of the market.
You know, there is hope building the interest rates will
come down to a point that they need to. But
the more these tensions rise, the more central banks might
be cautious with their action as we move through twenty
twenty five. So there is just this sea of issues
(07:10):
impacting the top of the market, and as Marcus says,
you know, lower down.
Speaker 1 (07:14):
To normal bit of the market and just before we
sort of move on to you know, what can be
done and will anything be done? And indeed will they
try to do more? Because I think that would be
the sort of race, the kind of bet at the moment,
given the budget problems. They are making worse themselves every day.
But just looking at your patch, Damien, who will buy
a five million you know, if you've got us a
s uplus a five million pound plus houses? And the
(07:35):
other thing I understand is the problem is that a
lot of these non doms they aren't under pressure to sell.
They're wealthy, so they put them on the market. Sometimes
it inflated rate values, but they don't care and they're
just waiting to see, you know, does it however long
it takes. They don't need the money, whereas normal families
need the money, so they have a different pressure and
strategic outlook when selling a house.
Speaker 3 (07:57):
It's yeah, I mean, braks have said to me, it's
the year of the day, mestic buyer. If you've got
a rich brit who can afford a property five million
pounds plus, they're the ones you're looking to target at
the moment if you're looking to sell one of these homes.
Those coming in from overseas are looking at renting. They
are brokers who are setting up rental divisions now in
response to the huge demand for rental properties because these
(08:18):
people coming into the UK they just don't want to
mess around with the tax environment, it's too uncertain and
it's just not worth their time right now.
Speaker 1 (08:26):
So we saw last night a huge climb down by
the Prime Minister and put the politics of it to
one side. There's a fiscal implication to not going ahead
with your five billion pound welfare reforms, and obviously that's
on top of the U turn on winter fuel payments,
so they're going to be looking to raise taxes in
the autumn markers they are.
Speaker 2 (08:42):
And I think that's what's quite amusing to see Governor
Bailey of the Bank of England essentially sort of show
that a bit of legg saying that he's going to
have to cut interest rates probably a bit more aggressively,
and certainly I think one's nailed on for August. But
also the fact they may stop obliterating the long end
of the guilt market by selling active guilds, but then
the girl market yield rows. Why because everyone knows, hang
(09:03):
on a second, a five billion a hole from welfare
is actually going to extrapolates probably fifteen to maybe twenty
billion of extra taxes in October and that makes life
very difficult. So it's throw back onto Bailey. Does that
make him want to hold off and do nothing or
does it mean he's going to have to cut interest
rates more? And I think it's the latter, and I
think they're going to have to cut rates more, which
(09:25):
we're already seeing two and five year swaps, which is
as a hedging tool that most mortgage providers at least
reference depending on the pots of cash they got. But
they some of this stuff that will head straight away
and therefore they lock in a rate and that's what
were their offers for as long as demand lasts, and
that is getting slightly better. It's the one good thing
we have got going on the UK mortgage market. One
(09:46):
that the banks aren't for closing. Two that they are
being flexible on lots of different types of extended maturities
and various other different types of structuring, on interest only
and things like that. But at the same time they're
more aggressive on their their mortgage off than the actual
underlying guvernment bond yields are, so in that sense we
should be quite thankful at that. Probably mortgages are going
(10:08):
to get better, which may add some support on the
broader market. I think the North of England, Wales and
other parts of perhaps lower price regions are sill set
to do fine. It is the wealthiest part of Europe,
London and Southeast Corridor, all that area there, which is
in a different world now. Normally it leads the market,
but it is, as Damian's very clearly explained, it's in
(10:30):
a vacuum now whereby we will struggle and it doesn't
really matter where interest rates are quite so much.
Speaker 1 (10:35):
But when you talk about those fifteen to twenty billion
of tax rises that we're now assuming she has to
go for, and obviously she had her the chancellor eliminated
and you know, the basic rate and income tax generally
because of the pledges made during the campaign, which she
may or may not roll back on. But that's very
tricky politics for her too. You know what she left with,
and you know, you once put a time as a
labor chancellor might think, well, i'll go for more property taxes.
Speaker 2 (10:58):
I think she goes on pensions. I think she goes
on potential hope. She said she's gonna avoid capital gains tax,
which again very much ties into the property aspect. I
think pensions are are the prime target, and she'll just
expand the bands of income tax. The physisical track. Whether
that gets her to the number she needs. I'm not
sure there are some ringking links you can do and
boy about banking and contitative tiny, but there are some
(11:18):
ways the OBAR could be helpful. However, the Office of
Budget Responsibility, her biggest friend, the one she's slashed herself too,
have just come out and much of the immortal words,
they've been too optimistic on their economic outlook. If they
revise down the economic outlook, the numbers we're talking at
cas of a maybe thirty plus billion, and then the
wheels are off and maybe then actually the OBI will
(11:39):
do themselves out of business, but she'll have to cancel
paying any attention to them, Damien.
Speaker 1 (11:43):
There were reports that've gone quiet now, but there were
reports that she might one of the U turns might
end up being on the non dom. Is that something
that sort of ripples through the sector too late, Marcus says,
But was it something that was noticed by the people
you speak to, and was it something they believe they need?
Speaker 3 (12:00):
Yeah, I mean I immediately ran one of the brokers
who actually put to my attention that huge price drop
in Mayfair after the news of the non dom U
turn came out. She said it could stop the bleeding,
but it's not going to change things overnight. I think
you look at all the other sea of issues at
the top of the market, this is sort of the
focal point. So if there was a U turn, particularly
on the forty percent inheritance tax on the overseas assets,
(12:23):
I mean, that is just something that these non doms
they cannot swallow that. If the inheritance tax side of
things is looked at, then that is absolutely the part
of the non doms debate which resonates the most when
it comes to demand for the top end of the
housing market. So I think it would be extremely interesting
if that was looked at, And I think that is
almost just that kind of life saver for brokers and
(12:45):
sellers at the moment that they're kind of looking at
as will this be the point that could just about
get our home on the market and sold.
Speaker 1 (12:54):
Do you think inside the treasury they will be worried
about the dynamics we're discussing here. Think when they've brought
them through they would have foreseen some of this. Is
some of this desirable from a policy perspective. I'm trying
to be see it from their perspective.
Speaker 3 (13:10):
I think they have to be that all of this
talk about a wealth exodus is extremely concerning for the UK.
And you know, like I said at the start of
the conversation, there's been this debate around you know how
deep this exodus has been. But when I'm speaking to
the people selling these homes, it is really really serious.
And I think the fact that we're seeing reports of
a potential U turn might hint to the fact that
(13:31):
they are genuinely sitting down and speaking about this. And
you know, I think the action that will be taken
will be telling.
Speaker 1 (13:38):
Imagine also being a Treasury civil servant where you've put
forward suggestions for it was Rachel Reeves's last budget, you
expect that they will be enacted. Is you expect that
your budget is balanced because it will go through And
you're now seeing a number of U turns that extremely expensive,
So you'll be thinking, well, what tax rises do I
suggest for the next autumn? Because the ones I suggested
(13:59):
for the last autumn got junct as soon as it
got hot. So I think we will become a not
a crisis, but a real sort of breakdown in trust
between civil servants and the political class. Even further, because
if you're the ideas you're part of the thought through
policies you're proposing, you cannot be confident will last the
parliament exactly.
Speaker 3 (14:19):
And all of this talk about the political uncertainty. I
mean that is the one word that the real estate
industry doesn't like, uncertainty. I've already had conversations with people
speaking about the next election and the rise of reform
and this huge uncertainty about who is going to be
in power in four or five years time. I mean,
all of these things are just combining to create uncertainty,
(14:41):
which means less transactions and a dip in.
Speaker 2 (14:44):
Pricesmia River, Well, first things first, on the property building side,
they're not going to get to half. I don't even
thin they're going to get to half. And I think
they know that now because the way the planning system
is and the current run rate on building this year
is is at eight year low, so it's going downhill
and planning permissions and the various other things you're coming
through the pipeline. So I would think they will be petrified.
(15:06):
I hope they'll be petrified. I mean literally crimea River
for them, But you know they are.
Speaker 1 (15:10):
Because of the hubris they've come through.
Speaker 2 (15:12):
Putting through a whole bunch of stuff which has been
batted away for fourteen years of Tory government for good reason,
and she's managed to fall for should be say, the
treasury tricks. And now we're seeing it's not just on
what we're talking about so far, but private school fees.
You know, as you mentioned, everything they've touched and changed,
it is blown up in their faces. So yeah, I
imagine they should be petrified. I hope they are, because
(15:34):
really the whole point of the model of following the
obr's fiscal rules is ruinous. They cannot go after employers
because they've clearly hit the labor market. We can't measure
the labor market, but everything ant dead is showing us.
So the O and S is dysfunctional. The OBI, therefore,
by the definition the numbers is getting through. It's dysfunctional.
I think the Bank of England is equally So you'll
(15:54):
have a situation all the sort of organs of state
are failing and the leadership at the top is trying
to enact a plan which has fallen apart at first
contact with the enemy, and that makes it very worrying.
What they have done is they have moved to the economy.
The spread the fiscal spurs they've done on the public
sector expense to the private sector. The public section is
what they said they wouldn't do well, they said we
(16:17):
will be That's exactly what they've got to have it
done business and the public sector, friend, is taking years
and well may not even calm by the time in
the end of this parliament, certainly on house building for instance.
But the private sector is getting hit immediately and they're
the ones you pay for it. And that's the trouble
you're seeing. You know, GDP may held up at one
percent or something pathetic, but the reality is the private
sector shrinking and that is what's going to stop unfortunately.
Speaker 1 (16:40):
Are I suppose the sort of the counter to a
lot of your very robust, excellent points is that a
lot of this direction of travel of a larger state
and greater expenditure on public and private was something that
the Conservative government began, and that we have an electorate
all of us included in this in this podcast, that
(17:00):
wants more and more and more, and so in the
absence of somebody saying we have to do less as
the state, and you've actually seen an increase in the
last six months with the need to increase defense spending.
So you're seeing greater demands.
Speaker 2 (17:14):
Buying American jets you mean, yeah.
Speaker 1 (17:16):
Yeah, or making our own submarines, as the Prime Minister
valiantly says with the Director of Travel, was begun before
Rechel Reeves and kissed Arma. They have, however, added to
that expenditure. And I think I suppose the question is
given lots of Western governments are increasing taxes and are
increasing expenditure. What are the rights? What would be the taxes?
(17:38):
It sounds like pensions. Is you think some.
Speaker 2 (17:40):
Mentions are the one thing they missed out on, one
of the few things they missed out on October everyone
expected myself, I actually just dust down the ones our
age in October saying this is what they're going to
kill and rerun them, because you know that the ones
that they they stopped doing what clearly had done some
road testing on they will have to do again. I
think this time for real, it's uptimes they're rais enough. Well,
(18:02):
I mean again, it depends how big the gap is. Depends.
There's a few other things they can pull out of
the far. They've already rigged the numbers by changing to
a thing called the sniffle. But basically they can move
the goldpost again, and I'm sure they will have to.
So there's lots of things that can be done, and
none of them very pleasant. But I mean, I would
say fiscal drag is and obvious cutting the pension allounces.
Speaker 1 (18:22):
Did you see the story the other day on Boomberg
that the number of higher rate taxpayers has doubled because
of fiscal drag.
Speaker 2 (18:27):
Well, no doubt continue that's the one good thing for
housing because we're paying all the civil servants more and
the various different parts of the sort of quango world
where unfortunately having to tax the rest of the employers
through national insurance contributions more. The net net that the
people who can afford to buy it, take a mortgage out,
are relatively getting paid better the civil service, so hopefully
they will buy more houses.
Speaker 1 (18:48):
Damian, What is the thing that the people you speak
to would like? What makes this better? Or is it
gone too far?
Speaker 3 (18:55):
That's you turn on nondums, That's what they'll say. The
inheritance tax that people have to pay on their overseas
assets is absolutely too much for them to swallow. To
allow the top end of the housing market to function
in a healthy manner. I think a decline in rates
would be helpful, But the top end of the market
is driven pretty much on sentiment on the headlines that
(19:16):
these top end buyers and sellers see. So I think
that absolutely it's it's just hard to wait to get
away from the non doms conversation. And I think the
fact that it's hard to get away from it shows
why Reeves is clearly making some considerations right now.
Speaker 2 (19:31):
We have to cut stamp duty. That's duty is a
huge for everyone, that the no non thing is vital.
But at same time that though, can they well, it's
fifteen billion for them, But the point is if that
fifteen billion on a high volume market goes to ten
billion on a low volume market, that will lose both ways.
So because the knock on effect of what you've done
(19:51):
to your housing market in the whole reall economy. So
at some point they might have to bite the bullet
on that to realize in a sort of multiplier effect
monstrous way of going about it that kness and doesn't
work necessarily in this particular instance, and cutting taxes is
actually the best way of growing the economy.
Speaker 1 (20:06):
Obviously, a year ago we're coming up for the one
year anniversary of the kiss Arma's government on Saturday, and
they came in and there was there was fanfare around
doing things differently. And to your point earlier, Damien, ending
the uncertainty and so on, is it is it your
the view of the people you speak to that that
has not happened.
Speaker 3 (20:25):
I think so it's just the way that the housing
market is playing out right now. Is it's pretty negative.
I mean sort of lower down in the kind of
five hundred thousand to one million ballpark. You know, things
are playing out in a more functional manner. But I
think while everything is this uncertain, this unhealthy in terms
of low transactions, huge price reductions, people aren't happy, brokers
(20:48):
aren't getting business. There's a lot of pressure on the
government to just do something to start to stimulate deals. Again.
Speaker 1 (20:57):
Thanks for listening to this episode of In the City
from Bloomberg. It was hosted by me Alecra Stratton, produced
by Sersardi Moses and dam and Tala Armadi. Brendan Francis
Newnham is our executive producer and special thanks to Marcus
Ashworth and Damien Shepherd. Please subscribe, rate, and review wherever
you listen to podcasts,
Bloomberg Audio Studios, podcasts, radio News. Welcome to in the City.
Each week we unpack a story that's crucial to the
world's financial capitals. I'm Allegra Stratton. So the UK housing
(00:26):
market has been under pressure for some time, but now
the data is catching up. In June, house prices recorded
their sharpest drop in more than two years. That's according
to Nationwide Building Society. The fall came as a surprise.
Economists had actually expected a small uptick. This latest decline
follows the government's move in April to raise transaction taxes.
(00:48):
It's a change that's made life even harder for buyers
already dealing with high borrowing costs. And if you zoom
in on the luxury end of the market, the picture
gets even bleaker. London's prime property, once a safe haven
for global capital, is in a drawn outslide. Prices are
now more than twenty percent below their peak, with no
(01:08):
real signs of a rebound.
Speaker 2 (01:11):
Welcome to the City of London, The.
Speaker 3 (01:13):
City of the City of London.
Speaker 1 (01:17):
Band we need mind the gap between and the financial
hearts of the country.
Speaker 3 (01:28):
The City, the City.
Speaker 2 (01:30):
Welcome to in the City, Clear of the doors.
Speaker 1 (01:36):
Peace. So in this episode, we want to dig into
what's driving this UK housing slow down and what it
might tell us about where we're all heading next. To
do this, I'm joined by Marcus Ashworth, who's a Bloomberg
opinion columnist, and Damian Shepherd, who's Bloomberg's European real estate reporter.
It's brilliant to have you both, hear Marcus, Let's just
(01:57):
start with you. There's nationwide numbers. As we said in
the intro, they expected it to be a one percent increase.
It ended up being a point eight percent decline. Is
it significant?
Speaker 2 (02:07):
We're all doom. It is significant. And firstly, I don't
believe that economists should try and estimate monthly housing numbers
because it's this point listly pointless and it shows you
by this myss that that really all you should be
doing is maybe a quarterly but really on an annual
basis where you guess it might be because the nature Onde
only looks at its own selection of mortgages, and it's
(02:29):
probably the most accurate in the context of a very
inaccurate field of competitors. And I just think that the
rush toulfill completions before the April deadline and the stamp
duty rose. It was only such a minor rise, it's
had such an outsize effect where really it's been the
most pointly bad economic decision I think from the Chancellor,
(02:50):
and it's created a vacuum and we're seeing the results
of that now whereby you just literally the whole markets
has opened up and we have nothing to show for
it because volumes and this is the whole point you need.
You need an active housing market, doesn't matter of price,
going down a price and going up, you need to
be able to transact. And because stamp duge is so
high at the top end, no one's downsizing because it's
ruinous for people though that she's got Hang on second,
(03:11):
I'm solding a four bedroom house and picking up a
two bitche and flat and I get nothing out of it,
so they don't. At the same time, I think to
increase charges on first time buyers and at the lower
end is just completely construe to what this government allegedly
is supposed to be about. Blah blah blah. This is
the price where I'm worry most about. It's not so
much where house prices will go, because they'll probably end
(03:32):
up higher because they're not building any so by definition
demand supply, but the lack of volume is seriously worrying.
Was it going to not the whole economy because it
hits everyone.
Speaker 1 (03:42):
So the couple of things you said there just to
pick up on before we bring Damien and so just
expand on your point about it's the lack of any transactions.
It's not really that our price is going up. Are
they going down? We completely take your point that they'll
probably end up going up in the end, but just
explain for the listeners why it's the sort of total
clogging up.
Speaker 2 (04:00):
Well, we just have had I think it's the worst
number for something like twenty years. It is money more
than twenty years. As far as monthly volumes for April,
we've yet to see May, but they're not likely to
be much better. It shows you your economy it's ground
to a halt, which means that your solicitors, your builders,
your plumbers, all the various ansillary trades, furniture supplies, you
(04:20):
name it. The whole lot is going to have a
knock on effect later in the year because the world
isn't churning it. And that is something which is you know,
because the costs of transaction are too high. They are
ruinously high. If you are a foreigner and buying a
second home in this country, it's nineteen one to nine
percent on top as a stand duty charge. I mean
it's just forget about it.
Speaker 1 (04:42):
But we don't want your tax.
Speaker 2 (04:43):
Yeah, it literally is, and that I let alone the
non domb stuff. So it's the reason why I'm sure
Dame will come onto it. High end London has collapsed
fifteen percent from Kensing and Chelsea in a year because
in price terms that volumes are non existent is because
everyone is trying to sell and then not are the
latest marginal seller and that is what's affecting everything.
Speaker 1 (05:04):
Neat segwe damien very neat.
Speaker 3 (05:06):
Indeed, I'm still kind of chuckling at your opener their
markets of we're all doomed, but if you speak to
the London brokers, they genuinely feel like they're doomed. Right now.
The top end of the market is in an absolute state.
I mean you mentioned they're let alone non doms. I
mean that is without question the biggest thing impacting the
five million pounds plus market. There's been debate around the
(05:28):
numbers of how many non doms are genuinely leaving. Chat
to the people selling those houses. They will tell you
this is very real, this is happening, and the knock
on effect on that side of the market is a
complete lack of demand because the people trying to ship
off their homes are trying to sell to people who
will come under the exact same issues as those trying
to leave the UK. It's leading to less transactions and
(05:50):
massive dip in prices. Price reductions are basically essential right
now if you want to get anywhere near selling your house.
There's one really really interesting case in Mayfair. Beautiful penthouse
went on the market for one hundred million pounds in
twenty twenty three, about six months ago, is knocked down
to eighty five million pounds. A few weeks ago it's
down to sixty eight million pounds. There's massive discounts going on.
(06:13):
It is as close as you can get to a
blood bath at the top at the moment.
Speaker 2 (06:17):
Yeah, it's not just the top unfortunately.
Speaker 1 (06:19):
So just let's stay at the top. Because the other
point that Marcus made that you would think they'd listen
to more in the treasury, because obviously we have to
assume that they're not. They're getting numbers that are telling
them they should be worried, but because of the politics
of the Labor Party, this is sort of their comfort zone.
I think all of us, all of us in this
room and people listening, will beg to differ. But I
think what we'll worry them is this point around ancillary services,
(06:42):
so the entertainment, the restaurants, around all of these houses
are where you have so many people in employment.
Speaker 3 (06:48):
Exactly, and I mean it's completely across the board. I
mean you've got to look at the geopolitical tensions as
well as another risk factor for the top of the market.
You know, there is hope building the interest rates will
come down to a point that they need to. But
the more these tensions rise, the more central banks might
be cautious with their action as we move through twenty
twenty five. So there is just this sea of issues
(07:10):
impacting the top of the market, and as Marcus says,
you know, lower down.
Speaker 1 (07:14):
To normal bit of the market and just before we
sort of move on to you know, what can be
done and will anything be done? And indeed will they
try to do more? Because I think that would be
the sort of race, the kind of bet at the moment,
given the budget problems. They are making worse themselves every day.
But just looking at your patch, Damien, who will buy
a five million you know, if you've got us a
s uplus a five million pound plus houses? And the
(07:35):
other thing I understand is the problem is that a
lot of these non doms they aren't under pressure to sell.
They're wealthy, so they put them on the market. Sometimes
it inflated rate values, but they don't care and they're
just waiting to see, you know, does it however long
it takes. They don't need the money, whereas normal families
need the money, so they have a different pressure and
strategic outlook when selling a house.
Speaker 3 (07:57):
It's yeah, I mean, braks have said to me, it's
the year of the day, mestic buyer. If you've got
a rich brit who can afford a property five million
pounds plus, they're the ones you're looking to target at
the moment if you're looking to sell one of these homes.
Those coming in from overseas are looking at renting. They
are brokers who are setting up rental divisions now in
response to the huge demand for rental properties because these
(08:18):
people coming into the UK they just don't want to
mess around with the tax environment, it's too uncertain and
it's just not worth their time right now.
Speaker 1 (08:26):
So we saw last night a huge climb down by
the Prime Minister and put the politics of it to
one side. There's a fiscal implication to not going ahead
with your five billion pound welfare reforms, and obviously that's
on top of the U turn on winter fuel payments,
so they're going to be looking to raise taxes in
the autumn markers they are.
Speaker 2 (08:42):
And I think that's what's quite amusing to see Governor
Bailey of the Bank of England essentially sort of show
that a bit of legg saying that he's going to
have to cut interest rates probably a bit more aggressively,
and certainly I think one's nailed on for August. But
also the fact they may stop obliterating the long end
of the guilt market by selling active guilds, but then
the girl market yield rows. Why because everyone knows, hang
(09:03):
on a second, a five billion a hole from welfare
is actually going to extrapolates probably fifteen to maybe twenty
billion of extra taxes in October and that makes life
very difficult. So it's throw back onto Bailey. Does that
make him want to hold off and do nothing or
does it mean he's going to have to cut interest
rates more? And I think it's the latter, and I
think they're going to have to cut rates more, which
(09:25):
we're already seeing two and five year swaps, which is
as a hedging tool that most mortgage providers at least
reference depending on the pots of cash they got. But
they some of this stuff that will head straight away
and therefore they lock in a rate and that's what
were their offers for as long as demand lasts, and
that is getting slightly better. It's the one good thing
we have got going on the UK mortgage market. One
(09:46):
that the banks aren't for closing. Two that they are
being flexible on lots of different types of extended maturities
and various other different types of structuring, on interest only
and things like that. But at the same time they're
more aggressive on their their mortgage off than the actual
underlying guvernment bond yields are, so in that sense we
should be quite thankful at that. Probably mortgages are going
(10:08):
to get better, which may add some support on the
broader market. I think the North of England, Wales and
other parts of perhaps lower price regions are sill set
to do fine. It is the wealthiest part of Europe,
London and Southeast Corridor, all that area there, which is
in a different world now. Normally it leads the market,
but it is, as Damian's very clearly explained, it's in
(10:30):
a vacuum now whereby we will struggle and it doesn't
really matter where interest rates are quite so much.
Speaker 1 (10:35):
But when you talk about those fifteen to twenty billion
of tax rises that we're now assuming she has to
go for, and obviously she had her the chancellor eliminated
and you know, the basic rate and income tax generally
because of the pledges made during the campaign, which she
may or may not roll back on. But that's very
tricky politics for her too. You know what she left with,
and you know, you once put a time as a
labor chancellor might think, well, i'll go for more property taxes.
Speaker 2 (10:58):
I think she goes on pensions. I think she goes
on potential hope. She said she's gonna avoid capital gains tax,
which again very much ties into the property aspect. I
think pensions are are the prime target, and she'll just
expand the bands of income tax. The physisical track. Whether
that gets her to the number she needs. I'm not
sure there are some ringking links you can do and
boy about banking and contitative tiny, but there are some
(11:18):
ways the OBAR could be helpful. However, the Office of
Budget Responsibility, her biggest friend, the one she's slashed herself too,
have just come out and much of the immortal words,
they've been too optimistic on their economic outlook. If they
revise down the economic outlook, the numbers we're talking at
cas of a maybe thirty plus billion, and then the
wheels are off and maybe then actually the OBI will
(11:39):
do themselves out of business, but she'll have to cancel
paying any attention to them, Damien.
Speaker 1 (11:43):
There were reports that've gone quiet now, but there were
reports that she might one of the U turns might
end up being on the non dom. Is that something
that sort of ripples through the sector too late, Marcus says,
But was it something that was noticed by the people
you speak to, and was it something they believe they need?
Speaker 3 (12:00):
Yeah, I mean I immediately ran one of the brokers
who actually put to my attention that huge price drop
in Mayfair after the news of the non dom U
turn came out. She said it could stop the bleeding,
but it's not going to change things overnight. I think
you look at all the other sea of issues at
the top of the market, this is sort of the
focal point. So if there was a U turn, particularly
on the forty percent inheritance tax on the overseas assets,
(12:23):
I mean, that is just something that these non doms
they cannot swallow that. If the inheritance tax side of
things is looked at, then that is absolutely the part
of the non doms debate which resonates the most when
it comes to demand for the top end of the
housing market. So I think it would be extremely interesting
if that was looked at, And I think that is
almost just that kind of life saver for brokers and
(12:45):
sellers at the moment that they're kind of looking at
as will this be the point that could just about
get our home on the market and sold.
Speaker 1 (12:54):
Do you think inside the treasury they will be worried
about the dynamics we're discussing here. Think when they've brought
them through they would have foreseen some of this. Is
some of this desirable from a policy perspective. I'm trying
to be see it from their perspective.
Speaker 3 (13:10):
I think they have to be that all of this
talk about a wealth exodus is extremely concerning for the UK.
And you know, like I said at the start of
the conversation, there's been this debate around you know how
deep this exodus has been. But when I'm speaking to
the people selling these homes, it is really really serious.
And I think the fact that we're seeing reports of
a potential U turn might hint to the fact that
(13:31):
they are genuinely sitting down and speaking about this. And
you know, I think the action that will be taken
will be telling.
Speaker 1 (13:38):
Imagine also being a Treasury civil servant where you've put
forward suggestions for it was Rachel Reeves's last budget, you
expect that they will be enacted. Is you expect that
your budget is balanced because it will go through And
you're now seeing a number of U turns that extremely expensive,
So you'll be thinking, well, what tax rises do I
suggest for the next autumn? Because the ones I suggested
(13:59):
for the last autumn got junct as soon as it
got hot. So I think we will become a not
a crisis, but a real sort of breakdown in trust
between civil servants and the political class. Even further, because
if you're the ideas you're part of the thought through
policies you're proposing, you cannot be confident will last the
parliament exactly.
Speaker 3 (14:19):
And all of this talk about the political uncertainty. I
mean that is the one word that the real estate
industry doesn't like, uncertainty. I've already had conversations with people
speaking about the next election and the rise of reform
and this huge uncertainty about who is going to be
in power in four or five years time. I mean,
all of these things are just combining to create uncertainty,
(14:41):
which means less transactions and a dip in.
Speaker 2 (14:44):
Pricesmia River, Well, first things first, on the property building side,
they're not going to get to half. I don't even
thin they're going to get to half. And I think
they know that now because the way the planning system
is and the current run rate on building this year
is is at eight year low, so it's going downhill
and planning permissions and the various other things you're coming
through the pipeline. So I would think they will be petrified.
(15:06):
I hope they'll be petrified. I mean literally crimea River
for them, But you know they are.
Speaker 1 (15:10):
Because of the hubris they've come through.
Speaker 2 (15:12):
Putting through a whole bunch of stuff which has been
batted away for fourteen years of Tory government for good reason,
and she's managed to fall for should be say, the
treasury tricks. And now we're seeing it's not just on
what we're talking about so far, but private school fees.
You know, as you mentioned, everything they've touched and changed,
it is blown up in their faces. So yeah, I
imagine they should be petrified. I hope they are, because
(15:34):
really the whole point of the model of following the
obr's fiscal rules is ruinous. They cannot go after employers
because they've clearly hit the labor market. We can't measure
the labor market, but everything ant dead is showing us.
So the O and S is dysfunctional. The OBI, therefore,
by the definition the numbers is getting through. It's dysfunctional.
I think the Bank of England is equally So you'll
(15:54):
have a situation all the sort of organs of state
are failing and the leadership at the top is trying
to enact a plan which has fallen apart at first
contact with the enemy, and that makes it very worrying.
What they have done is they have moved to the economy.
The spread the fiscal spurs they've done on the public
sector expense to the private sector. The public section is
what they said they wouldn't do well, they said we
(16:17):
will be That's exactly what they've got to have it
done business and the public sector, friend, is taking years
and well may not even calm by the time in
the end of this parliament, certainly on house building for instance.
But the private sector is getting hit immediately and they're
the ones you pay for it. And that's the trouble
you're seeing. You know, GDP may held up at one
percent or something pathetic, but the reality is the private
sector shrinking and that is what's going to stop unfortunately.
Speaker 1 (16:40):
Are I suppose the sort of the counter to a
lot of your very robust, excellent points is that a
lot of this direction of travel of a larger state
and greater expenditure on public and private was something that
the Conservative government began, and that we have an electorate
all of us included in this in this podcast, that
(17:00):
wants more and more and more, and so in the
absence of somebody saying we have to do less as
the state, and you've actually seen an increase in the
last six months with the need to increase defense spending.
So you're seeing greater demands.
Speaker 2 (17:14):
Buying American jets you mean, yeah.
Speaker 1 (17:16):
Yeah, or making our own submarines, as the Prime Minister
valiantly says with the Director of Travel, was begun before
Rechel Reeves and kissed Arma. They have, however, added to
that expenditure. And I think I suppose the question is
given lots of Western governments are increasing taxes and are
increasing expenditure. What are the rights? What would be the taxes?
(17:38):
It sounds like pensions. Is you think some.
Speaker 2 (17:40):
Mentions are the one thing they missed out on, one
of the few things they missed out on October everyone
expected myself, I actually just dust down the ones our
age in October saying this is what they're going to
kill and rerun them, because you know that the ones
that they they stopped doing what clearly had done some
road testing on they will have to do again. I
think this time for real, it's uptimes they're rais enough. Well,
(18:02):
I mean again, it depends how big the gap is. Depends.
There's a few other things they can pull out of
the far. They've already rigged the numbers by changing to
a thing called the sniffle. But basically they can move
the goldpost again, and I'm sure they will have to.
So there's lots of things that can be done, and
none of them very pleasant. But I mean, I would
say fiscal drag is and obvious cutting the pension allounces.
Speaker 1 (18:22):
Did you see the story the other day on Boomberg
that the number of higher rate taxpayers has doubled because
of fiscal drag.
Speaker 2 (18:27):
Well, no doubt continue that's the one good thing for
housing because we're paying all the civil servants more and
the various different parts of the sort of quango world
where unfortunately having to tax the rest of the employers
through national insurance contributions more. The net net that the
people who can afford to buy it, take a mortgage out,
are relatively getting paid better the civil service, so hopefully
they will buy more houses.
Speaker 1 (18:48):
Damian, What is the thing that the people you speak
to would like? What makes this better? Or is it
gone too far?
Speaker 3 (18:55):
That's you turn on nondums, That's what they'll say. The
inheritance tax that people have to pay on their overseas
assets is absolutely too much for them to swallow. To
allow the top end of the housing market to function
in a healthy manner. I think a decline in rates
would be helpful, But the top end of the market
is driven pretty much on sentiment on the headlines that
(19:16):
these top end buyers and sellers see. So I think
that absolutely it's it's just hard to wait to get
away from the non doms conversation. And I think the
fact that it's hard to get away from it shows
why Reeves is clearly making some considerations right now.
Speaker 2 (19:31):
We have to cut stamp duty. That's duty is a
huge for everyone, that the no non thing is vital.
But at same time that though, can they well, it's
fifteen billion for them, But the point is if that
fifteen billion on a high volume market goes to ten
billion on a low volume market, that will lose both ways.
So because the knock on effect of what you've done
(19:51):
to your housing market in the whole reall economy. So
at some point they might have to bite the bullet
on that to realize in a sort of multiplier effect
monstrous way of going about it that kness and doesn't
work necessarily in this particular instance, and cutting taxes is
actually the best way of growing the economy.
Speaker 1 (20:06):
Obviously, a year ago we're coming up for the one
year anniversary of the kiss Arma's government on Saturday, and
they came in and there was there was fanfare around
doing things differently. And to your point earlier, Damien, ending
the uncertainty and so on, is it is it your
the view of the people you speak to that that
has not happened.
Speaker 3 (20:25):
I think so it's just the way that the housing
market is playing out right now. Is it's pretty negative.
I mean sort of lower down in the kind of
five hundred thousand to one million ballpark. You know, things
are playing out in a more functional manner. But I
think while everything is this uncertain, this unhealthy in terms
of low transactions, huge price reductions, people aren't happy, brokers
(20:48):
aren't getting business. There's a lot of pressure on the
government to just do something to start to stimulate deals. Again.
Speaker 1 (20:57):
Thanks for listening to this episode of In the City
from Bloomberg. It was hosted by me Alecra Stratton, produced
by Sersardi Moses and dam and Tala Armadi. Brendan Francis
Newnham is our executive producer and special thanks to Marcus
Ashworth and Damien Shepherd. Please subscribe, rate, and review wherever
you listen to podcasts,
Host
Francine Lacqua
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