What caught my eye this week.
Were you one of the millions who a few years ago became obsessed with the fall of the Roman Empire?
Being stuck inside during the pandemic saw minds of a certain age turn to the rise of Julius Caesar, the demise of the Republic, and how Rome was eventually overrun (and run by – IYKYK) the barbarians.
Theories abound when it comes to explaining Rome’s collapse: populism, a reliance on slavery, imported decadence, outsourcing the military, debasing the currency. All more than enough to keep anyone in podcasts for a year.
However, if the collapse of the Roman Empire is hard to figure out, then the reasons for the decline and fall of another once all-conquering force – the UK property market, especially in London and the South East – and its prospects for recovery are equally contested.
You’ll recall prime prices in London are flat over the past ten years and well down in real terms.
The rest of the capital hasn’t fared much better – one in seven property owners in the capital sold at a loss last year, according to the Land Registry – and the Covid-migration price bounce in the more scenic regions of the South East long ago unwound, too.
It’s largely only in the Midlands and the North of England where prices are still advancing.
And mostly that’s because they took so long to recover from the crash of 2008/2009.
Barbarians at the front gate
Who should disappointed homeowners blame for the down valuations, gazundering would-be purchasers, and houses that fail to sell amid a glut of similar listings?
Well, themselves in the first instance for pricing their homes too highly, of course.
But as for what did for the UK property market more generally – take your pick.
Interest rate rises surely did the most damage recently. But London was soggy long before the five-minute reign of Empress Liz Truss spiked mortgage rates up.
Higher transaction taxes and a decade-long effort to make buy-to-let less attractive to casual investors? They must be in the mix.
The overall tax take is up too. That leaves less to spend on property.
Then you have Brexit and its aftermath, and the exodus of non-dom money in London.
Most recently, Labour has thrown a wet blanket over any sparks of life in the UK economy, not least with its interminable Budget speculation. (It’ll be ‘interesting’ to see the impact of its new mansion tax on homes above £2m.)
Bread and circuses
On the other hand, incomes have risen quite a bit in recent years – in nominal terms at least – and years of price attrition has surely taken the froth off most property valuations.
The FT’s graph below shows that first-time buyer affordability has improved. Those of us who own our homes thanks to a mortgage are also typically in a better spot, as inflation has eroded the real value of our often nominally-monstrous debts.
And – whisper it – Rachel Reeves and her wonks have gone for more than a month now without floating a trial balloon to send would-be homebuyers back under their blankets.
Finally, we’re building far fewer new homes than we need to. This should help support prices, especially in London.
All that adds up to what counts for optimism in UK property these days!
Caveat emptor
Talking of the chancellor, if I were her I would have simplified and slashed stamp duty on residential property in the Budget, with the expectation it would be at worst revenue neutral.
Maybe it’s a South of England thing, but nobody thinks about moving without looking at the stamp duty bill – easily tens of thousands for a three-bed terrace in London – and quailing. And often opting not to move as a consequence.
Something needs to get the UK growing again, and everyone playing swapsies with property – and revamping kitchens and bathrooms as they do so – has helped before.
If we could have an activity boom without prices taking off again, so much the better.
As things stand though, moving home remains dauntingly expensive. And there’s far less confidence in the property market than you’d expect, given relatively low unemployment and interest rates off their highs.
Consider this selection of the week’s relevant reads:
- Homes for sale reach eight-year high as competition intensifies – This Is Money
- UK property market ‘on the up’ amid bump in housing prices – Guardian
- Is now a good time to sell your home? – Which
- What’s behind London’s house price slump? – This Is Money
- The problem with the mansion tax is it’s badly designed [Paywall] – FT
The UK property market nearly always sees an optimistic asking price bump in January. But beyond that, who knows what 2026 will bring?
Feel free to place your bets in the comments – but personally I doubt we’re off to the chariot races.
(Sorry, I’ll get my toga.)
Have a great weekend.
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