"The English Housing Survey consistently reveals a tale of two Englands: for some, home is a safe haven and a substantial asset; for millions of others in the private and social rented sectors, it's a story of spiralling costs, persistent disrepair, and a profound lack of security."
I did that one myself - and yes, for about the third time ever, I did just quote myself! This is what the politicians will see, hear and read in the English Housing Survey - even if it isn’t “your reality” of your rental stock.
This week’s quote pertains to the deep dive, as usual, and I tackle the English Housing Survey 2024-25 first pass release.
As the calendar creeps towards a new year, it’s a natural time to pause and tackle the biggest challenges that keep SME property businesses from achieving true, sustainable growth. For most, this boils down to two core areas: Laying a bulletproof strategic plan for the next 12 months, and finally cracking the code on financial measurement and accountability. If you’ve ever felt lost in a sea of bookkeeping data, or if your productivity methods are falling short, it’s time to switch from doing to leading—and truly understand how your assets are performing. Book in on the next Property Business Workshop with myself and Rod Turner - Thursday 22nd January - Central London - https://tinyurl.com/pbwnine
Firstly - I’m thankful for the feedback that I’ve received this week - in person, via message and email. I’m always so pleased to hear from people who do read or listen week in, week out, or every other Supplement, or similar. I’m still so surprised how many of you there are - and I appreciate the compliments but also take the obligations that the production of the Supplement has placed on me very seriously. I have for some time been thinking that the Supplement has been becoming a little bit long, and a little bit unwieldy, and I don’t want that, of course. I do want to ensure that I still get my messages across, but don’t lose sight of clarity, and don’t stop valuing both my own time in producing it and your time in consuming it.
With that in mind, I’ve once again tried a few refinements this week, particularly in conciseness! Please, again, let me know what you think.
Trumponomics to discuss once more. The UK was directly involved in the EPD - The US/UK Economic Prosperity deal. What was on the table? The UK is paying more for US drugs, but limited to new and groundbreaking drugs. Simply - the US spends the most on R&D for drugs, and in the eyes of DT - we were not paying enough to his wonderful companies! So now we will. This keeps them free of tariffs. NHS budget goes up? Yes, but it is a small fraction (still billions, of course) and the drugs still need to deliver worthwhile benefits, handled by the least nice organisation of them all, NICE. A tough job.
Mr T also oversaw the release of a national strategy document which you might have seen - referring to Europe’s “civilisational erasure” due to migration and integration. It often strikes me that European nations generally thought of as pretty liberal are actually pretty strong on cultural changes and religious ground-shifts that they do not “like”; however, the report seems to pin what we already knew to the mast - the US has plenty of time for the nationalist, further-right parties that have captivated a lot of attention (and votes) in recent years.
What did we do in the UK? Reminded the US that we are independent and set our own foreign policy, and said in a very British way “we don’t need outside advice, thanks”. What’s looming in the background? More tariffs, and further/ongoing negotiations on that front.
The UK real time property market is next up on the slate. Chris Watkin is “our man in Amsterdam” as always. A stripped-back summary of the article:
Market Overview & Listings
The most significant trend noted is a surge in £1m+ listings in Inner London following the recent budget, driving the average national listing price up by over 20% to £452k. However, the average asking price for agreed sales remains steady at £350k, creating a notable 29.3% gap between seller expectations and buyer reality. New listings slowed to 22.7k for the week, consistent with seasonal expectations, though year-to-date (YTD) listings of 1.633m remain 0.5% higher than in 2024.
Sales Performance Gross sales volume remains resilient, with 20.3k homes sold subject to contract (STC) last week. YTD gross sales stand at 1.203m, tracking 3% ahead of 2024 and nearly 12% above the 2017–19 average. Net sales (sales minus fall-throughs) are also positive, sitting 2.6% higher than the previous year at 914k YTD.
Reductions & Stock Price reductions dropped to 13.2k for the week, with only 8.8% of homes seeing price cuts in November - significantly lower than October’s 12.8%. Fall-through rates remain stable at 25%, slightly above the long-term average. Total stock levels on December 1st stood at 678k, identical to the same time last year, while the sales pipeline has grown by 2.2%. That’s the first time we have been under the 700k mark for many months, and stock levels are creeping back quickly towards “normal”. Are smaller investors a good way into their “great disposal” phase or will we see a new wave in the new year? We will keep an eye on it!
Overall, the market shows steady activity levels ahead of 2024 figures, despite seasonal slowdowns and pricing disparities in the luxury sector. We have come right back towards 2024 now in the end. Only a few weeks to go……
I always give Chris a weekly shout out - 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. His article gets published on the Property Industry Eye website, and the video on his YouTube channel - @christopherwatkin
- What’s in this week’s macrostasis? Nationwide and Halifax both produced their house price indices. The Bank of England Money and Credit Report always gets airtime here. I’ve put the PMIs in of course alongside Homes England who produced their housebuilding stats……these fit together in the context of a very bad construction PMI number. In the final slot? Gilts and swaps to round us up - always.
Nationwide go first, since they publish first:
Growth and Prices
Annual house price growth slowed to 1.8% in November, down from 2.4% in October. Despite this annual softening, prices rose by 0.3% month-on-month after adjusting for seasonal effects. The average UK house price now stands at £272,998.
Market Resilience
Nationwide’s Chief Economist, Robert Gardner, describes the market as "fairly stable." Mortgage approval levels have recovered to pre-pandemic norms, demonstrating resilience despite mortgage rates remaining double what they were before COVID-19 and house prices hovering near record highs. This stability persists even amidst subdued consumer confidence and a softening labour market. The post-inflation adjustment continues, and I sit wondering sometimes - how long until the “real bottom”? Will that just be when inflation is TRULY under control, or will 2026 be the year when we outstrip 3% nominal price growth for the first time for several years?
Impact of Policy
Gardner suggests that recent budget changes will have minimal immediate impact on the sales market. The newly announced high-value council tax surcharge, set for 2028, affects less than 1% of properties in England. However, increased taxes on property income could dampen the supply of rental homes, potentially sustaining upward pressure on rents, which are already at historical highs. I was pleased to see this context compared to some of the madness claiming “10% off sales” on all property because of the Mansion Tax.
Outlook
Looking ahead, affordability is expected to improve modestly as income growth outpaces house price rises. If the Bank Rate is lowered in coming quarters, borrowing costs may moderate further. This, combined with household debt-to-income ratios being at their lowest in two decades, is expected to support buyer demand moving forward. Lowest in two decades - if only someone had first identified this back in July 2023 and been banging on about it for the past 2.5 years, in an easy-to-digest Sunday periodical…….oh…..
Halifax up next: Based on the Halifax House Price Index for November 2025, the UK housing market has entered a period of marked stability, with house prices remaining broadly flat for the month.
Headline Figures
The average UK house price edged up by just £139 in November, leaving the monthly change at 0.0%. Consequently, the annual rate of growth slowed significantly to +0.7%, down from +1.9% in October. This represents the weakest annual growth rate since March 2024. Despite the slowdown, the average property price stands at a record high of £299,892, hovering just below the psychological £300,000 barrier.
Market Context
Amanda Bryden, Head of Mortgages at Halifax, described 2025 as "one of the most stable years for the housing market over the last decade." You wouldn’t have expected this - you might have done in the context of the last several years, but not of the last decade. Bear in mind we’ve absorbed a stamp duty reintroduction, for example. The sharp dip in annual growth figures is largely attributed to "base effects" - comparing current prices against a period of strong growth a year ago - rather than a dramatic recent downturn. The market has shown resilience in the face of political uncertainty surrounding the recent Autumn Budget.
Regional Divide & Affordability
A clear North-South divide persists. Northern Ireland remains the strongest performer with annual growth of +8.9%, followed by Scotland at +3.7%. In contrast, London saw prices fall by -1.0%, and the South East dipped by -0.3%. Like the ONS and the overall regional reports in the RICS reports, for example - London is falling, officially, in nominal terms.
On a positive note for aspiring homeowners, affordability is improving. With income growth outpacing house price rises, affordability is now at its strongest level since late 2015, and mortgage costs as a share of income are at their lowest in three years. Looking ahead, Halifax forecasts gradual price growth continuing into 2026 as interest rates are expected to moderate further. When you think this includes the complete normalisation in interest rates - which are still on their way south in terms of expectations - this is great news for buyers and the market in general, and likewise is great news for vendors including smaller investors who might be disposing and hoping to sell to FTBs (a far better prospect than selling to investors, in my experience!)
Onwards we go with a summary of the Bank of England’s Money and Credit report for October 2025, released on December 1st:
Lending to Individuals: Mortgages and Housing
October saw a noticeable cooling in mortgage activity. Net borrowing of mortgage debt by individuals dropped to £4.3 billion, down from £5.2 billion in September. This trend was mirrored in forward-looking indicators, with net mortgage approvals for house purchases decreasing by 600 to 65,000. Remortgaging activity saw a sharper decline, falling by 3,600 to 33,100 approvals - the lowest figure recorded since February 2025. Maintaining the 65k is still indicative of a very stable market though, and a 1% adjustment is infinitesimal really, especially with the backdrop of the budget.
Despite the slowdown in volume, the cost of new borrowing improved slightly for homeowners. The "effective" interest rate on newly drawn mortgages dipped to 4.17%, continuing a downward trend observed since March. However, the rate on the outstanding stock of mortgages remained static at 3.89%. 26 basis points is now the difference between existing and new, and the aggregate effect on the market of the interest rate normalisation is all but complete, and in 2026 these figures really should finally converge to “The New Normal”.
Consumer Credit Consumer appetite for unsecured debt also waned. Net borrowing of consumer credit decreased for the second consecutive month to £1.1 billion. This was split between £0.6 billion in credit card borrowing and £0.5 billion in other forms of credit, such as car finance and personal loans. While monthly borrowing slowed, the annual growth rate for total consumer credit held steady at 7.2%. Notably, credit card borrowing continues to grow at a double-digit pace annually (10.9%), whereas growth in other forms of credit slowed to 5.5%. These are not sustainable numbers, but this is credit repair in the face of what happened during Covid - not for us to get worried about just yet, but for us to keep our eyes on.
Lending to Businesses The corporate sector showed significant retrenchment. Private non-financial corporations (PNFCs) repaid a net £4.8 billion of finance in October, marking the highest level of net repayments since October 2023. This figure includes a substantial repayment of bank loans and bond redemptions. While large businesses focused on paying down debt, borrowing by small and medium-sized enterprises (SMEs) remained flat, with a net borrowing figure of just £0.1 billion. Why were they paying it back? Because they weren’t investing it, busy waiting for the budget, of course!
Money Supply and Deposits Households focused on saving, depositing an additional £6.8 billion into banks and building societies. There was a clear preference for liquidity and tax efficiency, with £5.5 billion flowing into interest-bearing sight deposits and £4.2 billion into ISAs. Overall, the net flow of sterling money (M4ex) slowed to £8.5 billion, down from £14.2 billion in September, reflecting a broader trend of consolidation across the UK economy. Fear of ISA “clipping”, which didn’t end up being too bad unless you are allergic to stocks and shares, led to a decent lump going towards a flexible “instant access” style account.
Alongside this, the money supply actually shrank by 0.2% as measured by M4, and that all helps clip inflationary wings - the figure last month was +0.6% which looked highly inflationary/like it was pouring fuel on the fire.
How about the November PMI data? A mixed bag that signalled weak growth, but significant disinflationary trends that policy makers cannot afford to ignore, according to the S&P Global commentary.
The overall UK private sector saw output growth weaken to only a marginal expansion (Composite Output Index 51.2, down from 52.2 in October). Crucially, total new work declined fractionally, contributing to the steepest overall decline in employment since February. The flash number was 50.5, so this was considerably better than we first feared - but this isn’t a “strong growth” number - nor could it have been in the actual budget month, when there was SO much speculation. A print above 50 is the best we were going to get.
The Services sector, our primary economic engine, slowed significantly. Its Business Activity Index eased to 51.3, signalling a marginal expansion that was much softer than the post-pandemic average. The real kicker? We saw a renewed downturn in new orders, the first recorded since July. This weakening demand, coupled with fragile client confidence and delayed investment decisions due to Budget uncertainty, contributed to the fastest fall in employment since February. Perhaps the most critical takeaway for the Bank of England is that while input costs (largely salary payments) accelerated, prices charged inflation across services hit its lowest point since January 2021, suggesting intense competition is eroding margins. Good? OK for the consumer. Tough for the firm.
Meanwhile, Construction is deep in the red. November data revealed a sharp retrenchment, with the Total Activity Index (39.4 - a “flashing red warning signals” print) pointing to the steepest downturn in output for five-and-a-half years. Activity fell across all three sub-sectors, with housing, commercial, and civil engineering all registering their sharpest falls since May 2020. New order intakes declined at a pace not seen since early 2009 (excluding the pandemic). Consequently, staffing cuts were the most marked since August 2020. Business optimism was also at its lowest point since December 2022, fuelled by pervasive worries about long-term UK economic prospects and delayed client investment ahead of the Budget - that’s the last time this year I mention budget pessimism, promise (but let’s face it; the ruling party need to do a better job).
The only glimmer of sequential improvement came from Manufacturing, which edged back into growth territory for the first time in over a year (PMI 50.2 - same as the flash number). Production rose for the second consecutive month, supported by improved domestic demand, though new export business remains in contraction. However, the headline news here is price action: rising competitive pressures and weak sales pipelines led to factory gate selling prices being cut for the first time in over two years.
This combination of soft performance and subsiding price pressures signals a clear shift in the policy debate away from inflation fears and squarely onto the need to support economic growth. The takeaway is simple: uncertainty - especially around policy - once again proved highly costly.
As so often - services carried us, but manufacturing is not dragging us back - construction numbers are really worrying, though - we just need to hope it was a “pre-budget” freeze, and that all will be “alright on the night”.
Did Homes England agree? Well, remember this is November’s construction report versus a 6-month summary of what happened between April and September - so it isn’t apples and apples. Here’s what the Homes England report said:
What you get in this report: Details of the housing supply delivered through programmes managed by Homes England across England, excluding London (except for specific programmes administered on behalf of the Greater London Authority), for the six-month period between 1 April and 30 September 2025. It focuses on housing starts on site and housing completions, providing a snapshot of the government's progress in delivering both market and affordable housing.
Housing Starts
During this period, there were 15,581 total housing starts. Of these, 11,474 were designated as affordable housing, representing 74 per cent of the total starts. This figure marks a notable decrease of 12 per cent compared to the same period in the previous year. A significant portion of these affordable starts, specifically 8,938 units, had their tenure listed as "to be confirmed," which is a slight increase of 1 per cent from the prior year.
However, confirmed tenures saw substantial declines. Social Rent starts dropped by 38 per cent to 1,248 units, while Affordable Rent starts fell by 24 per cent to 826 units. Intermediate Affordable Housing schemes, including Shared Ownership and Rent to Buy, experienced the sharpest decline, decreasing by 68 per cent to just 462 units. The vast majority of these starts (94 per cent) were delivered under the Affordable Homes Programme (AHP) 2021 to 2026.
Housing Completions
In terms of finished housing, 13,500 units were completed during this six-month window. Affordable housing accounted for 10,309 of these completions, or 76 per cent of the total. This represents a 3 per cent decrease in affordable completions compared to the previous year.
Unlike starts, the completion figures showed a mixed performance across different tenures. While Intermediate Affordable Housing completions fell by 8 per cent to 4,654 units and Affordable Rent completions dropped by 5 per cent to 3,316 units, Social Rent completions actually saw a positive trend, increasing by 15 per cent to 2,339 units.
Programme Context
The data highlights the transition between funding cycles. The Shared Ownership and Affordable Homes Programme (SOAHP) 2016 to 2021, which closed to new business in March 2024, is winding down but still contributed 25 per cent of completions. Meanwhile, the newer AHP 2021 to 2026 is now the primary driver of supply, responsible for 70 per cent of completions and 94 per cent of starts.
Overall - things are going backwards, not forwards, in terms of the tenures that were supposedly so very important to this Government. 12% fewer affordable starts. Sinking like a stone. 38% fewer for social rent! Homes England blamed “base effects” and the changeover from one funding programme to another, and simply claimed these were “back to business as usual” figures, after a surge the year before. Did they point out last year that that was the anomaly, and this would happen this year, in order to manage expectations and head these accusations off at the pass? I’ll let you guess that one!
Gilts and swaps, then. The “numberwatch” - 5y gilt yields, opening the week at 3.93% and closing it at 3.942%. If it will be an up week, then 1.2 basis points is acceptable. Thursday’s close at 3.891% was preferred, translating to a swap of 3.574%, a 31.7 basis point discount (creeping downwards in the past couple of weeks from the 35-36 point discount that seems to have persisted forever and a day). One month ago? 3.61% on the swap. One year ago? 3.814%. The 2-year is showing even better numbers - 3.453% on the swap, compared to 3.536% one month ago and 4.089% 1 year ago. 2 year mortgages look a lot cheaper, 5 year mortgages look a little bit cheaper. The 30-year gilt opened at 5.241% and closed down at 5.197%, as the bond markets continued to digest the budget and very little of the macro news really changed anything from a yield perspective. The longs are calming down further and indeed tested 5.15% a few times on Thursday and Friday (but ultimately rebounded). Still, nearly 5 bps off the longs means a slightly shallower yield curve, and seeing the 30s below 5% would make quite a lot of people “happier” about the market’s view of the long term stability of the UK.
The Deep Dive, as so often, had no choice this week. The release of the “first wave” of the English Housing Survey for 2024-25 (the fiscal year, ending March 2025) was out. It is SO important from a policymaking perspective that, regardless of the accuracy of surveys, or other concerns - we have to go deep.
In we go…..
The 30-Year Mortgage Is the New Normal, and the Elderly Now Own England, Outright
The English housing market, as delineated in the 2024-25 English Housing Survey (EHS), presents a structurally dichotomous profile, characterised by an intensified concentration of demographic capital in the older cohorts and an increased reliance on long-duration leverage among new market entrants.
While the overall aggregate proportion of owner occupiers has stabilised following a post-Financial Crisis decline, the internal composition of this tenure demonstrates a profound shift that necessitates a rigorous longitudinal analysis, extending back over two decades to contextualise the current inflection point.
The fundamental macro-trend confirms that owner occupation remains the dominant tenure in England, accounting for an estimated 65% of all 25.0 million households in 2024-25, a rate that has remained stable since the 2019-20 period.
However, this figure conceals the crucial internal reweighting. Historically, the peak rate of owner occupation was recorded in 2003 at 71%, followed by a steady decline in the early 2010s to a nadir of 63% in 2013-14. The subsequent recovery to 65% masks the demographic-driven inversion of debt status.
Specifically, the structure of owner occupation is now definitively weighted towards those who own their homes outright, who comprise 36% of all households in 2024-25, compared to those purchasing with a mortgage (mortgagors), who account for 29%.
This disproportionate growth of outright ownership is a decade-long phenomenon: in 2013-14, the proportion of outright owners (33%) only marginally exceeded mortgagors (31%). By 2024-25, this gap widened to seven percentage points (36% vs 29%), reversing the traditional reliance on leverage seen in earlier cycles.
This substantial realignment in ownership structure is, at least in part, directly attributable to the demographic trajectory of the population, specifically the large numbers of individuals reaching retirement and achieving debt-free status.
The evidence for this geriatric accumulation thesis is substantial and explicit in the demographic profile of the Household Reference Persons (HRPs). In 2024-25, outright owners overwhelmingly concentrated in the upper age bands. A staggering 62% of outright owner households contained an HRP aged 65 or over.
Conversely, among HRPs aged 65 or over across all tenures, 79% are owner occupiers, and within that group, 74% are outright owners, demonstrating the profound correlation between advanced age and asset consolidation. This is contrasted sharply with mortgagors, who are typically concentrated in the middle age bands, and private renters, the majority of whom have HRPs aged 25 to 54 years.
Regional analysis further highlights the maturity and equity divergence. London exhibited a significantly lower outright owner rate at 23% of households compared to 38% in the rest of England. This is potentially correlated with the lower median age in London (35 years) as reported by the Census 2021, suggesting a market where fewer participants have reached the pay-off threshold.
Meanwhile, specific regions, such as the North East, have seen an acute transformation since 2014-15, with outright ownership surging from 30% to 39%, while the mortgagor proportion concomitantly decreased from 31% to 25%. This geographical heterogeneity underscores that the path to equity maturity is regionally nuanced but nationally defined by ageing demographics.
Beyond demographics, the increasing financial stratification between outright owners and mortgagors is stark. Financial resilience, measured by the presence of savings, remains robust for outright owners, with 83% reporting savings in 2024-25, a significant increase from 75% in the pre-pandemic 2019-20 period.
This cohort, shielded from the effects of higher interest rates by their debt-free status, maintains higher levels of financial comfort, able to absorb cost-of-living increases better than other groups. Mortgagors, while showing strong savings rates (73%, up from 60% in 2019-20), face direct exposure to interest rate volatility, necessitating the examination of the financing structure for new entrants.
The second major structural deformation involves the necessary elongation of debt repayment schedules for First-Time Buyers (FTBs). The mean age of all FTBs in England has increased to 34 years in 2024-25 (up from 32 years pre-pandemic in 2019-20), rising to 35 years in London.
However, the most critical metric indicating structural affordability pressure is the mortgage term length: 62% of FTBs with a mortgage now have a repayment period of 30 years or more. This represents a material increase from the 47% reported just five years prior in 2019-20, signifying that the 30-year term is transitioning from a flexible option to the de facto standard for market entry.
This financial engineering reflects the higher barriers to entry, further evidenced by the concentration of FTBs in the highest income quintiles - 34% in Quintile 4 and 30% in Quintile 5 - confirming that market access is increasingly restricted to households with superior gross weekly incomes.
The average (mean) deposit for a recent FTB was substantial, at £78,131, further illustrating the required capital accumulation necessary for market participation.
In synthesis, the EHS 2024-25 data establishes two parallel realities within owner occupation. On one hand, a robust, ageing cohort of outright owners benefits from decades of appreciation and debt maturity, yielding high financial security (83% with savings) and dominating the ownership structure (36% of all households). On the other hand, the pipeline of new mortgagors is characterised by older first-time buyers who are systematically extending their debt horizon, with 62% committing to 30 years or more of indebtedness, a sharp acceleration over the last five years.
This reliance on temporal stretching to achieve affordability, juxtaposed against the demographic accretion of asset wealth among the elderly, encapsulates a critical structural tension in the English housing market's long-term sustainability and inter-generational equity.
The market has effectively adapted to high prices by lengthening the duration of debt, exchanging early-career affordability for protracted exposure to financial liabilities. This suggests that the 30-year mortgage is now less a strategic choice and more a prerequisite for capital deployment, effectively using future time to compensate for present cost inflation.
There’s another way of looking at this - as always - of course. The sharp increase in the interest rate since 2019-20 has been absorbed by “going longer”, in order to keep affordability to a similar level. Pay back more, take longer, that’s been the “solution” that the market has largely imposed upon itself, and expectations have been adjusted by the first-time buyers as the most important market participants.
Welcome to the English Housing Market: Your Principal Is Due, Plus £112 Per Week
For the property investor, the structural analysis presented in the previous section is not a lament on inter-generational fairness; it is a foundational market indicator signalling inelastic demand for the Private Rented Sector (PRS).
The demographic accretion of outright owner wealth, coupled with the systemic requirement for First-Time Buyers (FTBs) to engage in temporal stretching - epitomised by 62% of new entrants requiring mortgage repayment terms of 30 years or more - mandates that a large segment of working-age, aspiring homeowners remain captive in the rental market for extended periods.
This involuntary demand profile is the essential engine driving the observed velocity and quantum of housing cost inflation across both mortgagor and rental segments, fundamentally underpinning the potential for sustained operational alpha within the PRS.
The English Housing Survey (EHS) 2024-25 data provides empirical validation of this cost inflation thesis, offering investors crucial metrics for yield calculation, risk assessment, and portfolio benchmarking. The most salient figures confirm that the cost of shelter is escalating at a substantial, non-linear rate, particularly within high-demand urban centres. What blame should the Government take here for increasing the cost of rental unit delivery - and the risk - by quite so much? A significant amount, I would argue!
The Cost-of-Capital Arbitrage and Rising Nominal Yields
The most immediate and material impact of the current macroeconomic environment is the demonstrable rise in debt service costs for owner-occupiers, which provides a comparative reference point for the cost of capital required by highly leveraged Buy-to-Let (BTL) investors.
Mean weekly mortgage payments now stand at £242 nationally. Crucially, in London, the average weekly mortgage payment has vaulted to £375 in 2024-25, an increase of £112 since the 2019-20 period (£263). Outside the capital, the mean weekly mortgage payment also rose significantly, increasing by £50, from £170 to £220.
From a purely mechanical perspective, this escalation in mortgagor obligation simultaneously signals two things to the investor: first, that the financial barrier to owning is higher than ever, thus trapping more households in the PRS (as evidenced by the lack of significant size change in the PRS nationally, which holds 19% of households); and second, that BTL investors must now underwrite debt at a commensurately higher required yield to cover these escalated financing costs.
The rental market, reacting predictably to these twin pressures of high capital costs and sustained demand, exhibits proportional increases. The mean weekly private rent across England now sits at £250, a figure that has increased from £201 in 2019-20. Regionally, the divergence creates an explicit mandate for geographical risk weighting: London average private rent is £393 per week, compared to £207 per week in the rest of England. This velocity is not confined to the margin; the average weekly private rent increased nationally compared to both the prior year (£237 in 2023-24) and the pre-pandemic period.
For investors, this translates directly into stronger nominal gross yields, demonstrating that the market is successfully transmitting higher underlying cost structures (including investor financing costs) onto the consumer base. This is exactly how I said the market would have to react to interest rate normalisation - market rents would have to rise substantially to improve yields, because greater yields were needed to provide debt service cover. The kicker is always affordability; if people can’t afford it, they can’t rent it - regardless of what an investor “needs” in order to make a deal stack up. That’s where we get to market failure - and I’ve got my eyes on London and the South East to see how that market failure (which is inevitable) manifests itself in the coming years.
This situation is compounded by the structural income profile disparity within the market. The first section established that mortgagors are heavily concentrated in the highest income quintiles (40% in the top quintile). Conversely, private renters, while more evenly distributed across income quintiles, include substantial numbers of working households (76% of HRPs working full or part-time). The investor benefits from the fact that those with the highest earning power are frequently forced into the mortgagor tenure, while the private rental sector retains a sufficiently robust, though financially stressed, working population to sustain rent payments, particularly when compared against the social rented sector where 50% of HRPs are in the lowest income quintile.
The Risk/Reward Calculus: Affordability and Arrears Exposure
While the nominal increase in rental receipts is compelling, a dense analysis of the EHS data requires a stringent focus on the corresponding increase in operational risk, specifically tenant vulnerability and arrears exposure. The EHS calculates that private renters spend, on average, 34% of their household income on rent payments when housing support is included in income. When housing support is excluded, this affordability ratio deteriorates sharply to 39%. This figure significantly exceeds the 19% of household income spent by mortgagors on their payments. Part of the reason the disparity exists, of course, is that the homeowner average income sits around £60k, compared to the private renter income of £35k - and this chasm, rarely spoken of, is the biggest “indicator” of all as to whether someone will be in the Private Rented Sector or break through to homeownership.
This high proportion of income allocation is directly correlated with a palpable increase in tenant financial strain. A staggering 32% of private renters reported finding it either difficult or very difficult to pay their rent in 2024-25. This metric is critical for investor risk modelling, as it represents a significant increase from the 27% reported in the pre-pandemic 2019-20 period, reflecting the severe pressure exerted by the general increase in the cost of energy and other living costs alongside rising rents.
The investor must therefore navigate a market where the drive for higher yields clashes directly with tenant capacity limits. Although overall private renter arrears risk has shown some historical fluctuation, with 5% of private renters reporting current or previous arrears in the last 12 months in 2024-25, the rising difficulty in payment suggests a potential lag effect on future arrears statistics, necessitating cautious income projections. This is a crucial distinction between nominal rental growth and realised cash flow.
Furthermore, investors must account for the prevalence of vacant dwellings in the PRS. In 2024, 11% of private rented dwellings were vacant, with 8% of all PRS dwellings classified as "awaiting another tenant or owner". As so often, I get frustrated with surveys at points like this - were they on the rental market or were they for sale!? It’s a big difference.
This vacancy rate, significantly higher than the 3% seen in the owner occupied sector, imposes a drag on true yield realised, requiring investors to maintain robust capital reserves to cover debt service during void periods. In O-O, they would be waiting for sale, we would think, but it would be nice if the survey made that incredibly important distinction! It makes you wonder exactly what MHCLG are hoping to draw out of this rich dataset!
In conclusion, the EHS data package offers a highly stratified investment proposition. The underlying macroeconomic conditions, which necessitate temporal stretching for FTBs and have inflated owner-occupier costs by up to £112 per week in London, are providing a powerful structural uplift to nominal rents, creating favourable yield opportunities in a high-inflation environment. However, this is counterbalanced by a demonstrably fragile tenant base, where over a third of private renters report financial difficulty in meeting their obligations.
The sophisticated property investor understands that the current English housing market is a high-beta environment: high potential reward derived from sustained, inelastic demand, coupled with high operational risk necessitating superior tenant selection, active asset management, and rigorous accounting for non-payment and vacancy rates to convert rising nominal yields into sustainable, risk-adjusted returns.
The other conclusion that can’t be avoided is that the great exodus of landlords, much publicised by the rampers and the clickbaiters, is instead landlords selling to other landlords, certainly in the way it has played out thus far. We have still not even moved from the PRS being 19% to 18% of stock (although the peak was at 20%).
Your Home Might Be Fine, But You Are Less Happy: Pandemic Legacy Creates Two-Tier Resilience
The English Housing Survey (EHS) 2024-25 report is not merely a compendium of dwelling types and debt ratios; it is a clinical post-mortem of the psychological and societal scar tissue left by the COVID-19 pandemic, now overlaid by acute cost-of-living pressures. Four years post-onset, the EHS confirms that we are not ‘back to normal’ - we are living in a structurally impaired landscape where the pandemic’s legacy dictates financial resilience and, more depressingly, the collective capacity for contentment.
The data is clear: the pandemic did not act as a great leveller; it was a selective accelerant of existing inequalities, forging a two-tier system of household resilience. On one side, you have the asset-rich, debt-free cohort - the outright owners whose dominance in the housing market we dissected in the first part of the Deep Dive. The pandemic, and the subsequent fiscal and monetary responses, appear to have structurally enhanced their financial position.
The proportion of households with savings is still higher than it was before the COVID-19 pandemic. This is starkest among outright owners, where 83% reported having savings in 2024-25, up significantly from 75% in 2019-20. This is the cohort that, shielded from rising interest rates, possessed the ability to better absorb the increases in the cost of living.
Contrast this stability with the highly exposed rental sectors. While private renters saw an increase in savings presence (52%, up from 40% in 2019-20) and social renters (27%, up from 20%), the core issue remains financial fragility. This fragility manifests as heightened financial exposure to risk, particularly when juxtaposed against the backdrop of massive rent inflation noted in our middle section. The disparity in financial resilience is thus one of the pandemic’s most corrosive legacies: certain segments are more financially comfortable and able to absorb shocks, while a smaller but substantial proportion of households struggle and are increasingly exposed to risk.
But here is where the EHS delivers its existential gut punch: money, or lack thereof, isn't the only lingering trauma.
The data illustrates a widespread, cross-tenure decline in subjective well-being and accommodation satisfaction - a collective, structural unhappiness that persists despite, in some cases, improved savings levels. The report states explicitly that average wellbeing levels remain lower than they were pre-pandemic. When comparing 2024-25 scores to 2019-20, fewer households across all tenures reported their life was satisfactory (7.5 versus 7.7 pre-pandemic) and anxiety has demonstrably risen (2.9 versus 2.7 pre-pandemic).
One factor, of course, is that people are acutely aware of just how much rent has gone up. On that basis - you pay more, you expect more - so if you pay more and get the same, and don’t have a deep understanding of inflation (90%+ of the population don’t, of course) - they you will by definition be less happy.
The pandemic forced a fundamental, unwelcome re-evaluation of our relationship with our primary dwelling - a dwelling which was suddenly required to be an office, a school, a gym, and a constant refuge. The outcome? Households now report lower-than-usual levels of satisfaction with their accommodation. Satisfaction has fallen across all tenures since 2019-20. Even owner occupiers, who report the highest levels of satisfaction (94%), saw a marginal but statistically significant decrease from 95% pre-pandemic. Private renters dropped from 83% to 81%, and the already lowest-satisfied social renters fell from 78% to 75%. The dwelling, intended as a sanctuary, has become a source of pervasive, low-level discontent.
The most tragic legacy, however, is the stratification of loneliness and personal well-being. The social rented sector has been profoundly damaged. Social renters consistently report the lowest mean scores across the ONS well-being measures: lowest life satisfaction (6.8), lowest happiness (6.9), and highest anxiety (3.5). This is correlated with a disproportionate feeling of social isolation: those in the social rented sector were the most likely to report feeling lonely often or always (13%). The pandemic exposed and cemented the vulnerability of this sector, which also saw the largest increase in households containing someone with a long-term illness or disability, surging from 54% in 2019-20 to 61% in 2024-25.
That stat is an absolute show-stopper. Covid, of course, caused some of this - but the reassessment of disability benefits, personal independence payments and the likes - controversial already, having led to a rebellion in the house - but due a second bite of the cherry on the slate in parliament - is surely needed. This figure is not comparable in other developed nations - some action is needed and more deeper dives and educational pieces are critical.
This is the reality laid bare by the EHS: a society cleaved between those who have capital reserves and equity (the financially resilient outright owners) and those who are struggling to pay high rents (the increasingly anxious renters). The economic stress and the enforced proximity of lockdown have translated into chronic, lower aggregate well-being and higher rates of disability and illness across the board. We may have ‘bounced back’ on some economic metrics, but psychologically and structurally, we are running on a lower-octane fuel, less happy, more anxious, and more discontented with the place we are forced to spend most of our time.
The solution, of course, is the perennial struggle against complexity and apathy. We look at reports like this, full of dense data and structural realities, and the only logical conclusion is that the government is forced to keep tweaking the system, rather than doing something proper. The pandemic didn't break the housing market; it just finished hardening the existing fault lines, reminding us that, despite all the data and analysis, the core problem remains: there’s no creative funding model to get around the requirement for “appropriate returns on capital investment”.
Here’s the bit that has been missing from too many Supplements recently - so what? What should we all do about the contents of this newsletter? Well, here we go.
UK property investors should consider a high-beta, risk-adjusted strategy in response to the current market structure as detailed in the EHS, balancing increasing nominal yields with heightened operational risk of the incoming Renters Rights Act.
Investors must rigorously measure and calculate desired nominal gross yields, as the market is successfully transmitting higher capital and financing costs onto the consumer base through rising rents. Mean weekly private rents have increased substantially, particularly in London, providing higher yields for debt service cover - but are they high enough? If not - consider disposal, or at least repurposing the asset to HMO or provider/social housing.
Given the significant financial strain on tenants - with 32% of private renters reporting difficulty paying rent - investors must prioritize superior tenant selection and active asset management to mitigate risk. Due to the 11% vacancy rate in the Private Rented Sector (PRS), investors should also maintain robust capital reserves to cover debt service during void periods, ensuring rising nominal yields translate into sustainable realized cash flow.
Just this week I’ve heard many stories from landlords in the south of England, from a WhatsApp group that I’m in (group 734, of course!) - asking rents are down 5% to 7.5%. I suspect there has been some “overshoot” - rents went up like a rocket, ours certainly did, and on rent review we are finding more and more rents that need to remain the same/can not justify an increase year-on-year.
Investors should strategise geographically by recognizing the clear North-South divide in price performance. While London prices are falling, regional markets like Northern Ireland show strong annual growth. If in London - either repurpose, sell and repurpose capital, or work towards paying down debt because you cannot “afford” anything that looks like an LTV strategy above 30-50% depending on your yields.
When selling, vendors should be aware of the notable 29.3% gap between seller expectations (average listing price) and buyer reality (average agreed sale price). This week has been as anomalous as recent weeks in the other direction (with this gap being under 7% just a week ago) - take note of the longer term trend here, and don’t throw the baby out with the bathwater. In reality, cheap stock is selling well and every “mini-mansion” not caught by the tax (at this time…..) that was thinking of selling, has now been listing industriously after the (temporary) certainty delivered in the budget.
In areas where affordability is improving for homeowners, investors should consider selling to First-Time Buyers (FTBs), who are considered a more favorable exit prospect than other investors.
Finally, investors should remain confident in the structural, inelastic demand for the PRS, which is underpinned by the increasing necessity for FTBs to take out 30-year mortgages, effectively trapping working-age aspiring homeowners in the rental market for extended periods. The market structure confirms that landlords are generally selling to other landlords, rather than exiting the sector entirely. This is helpful, in many ways, because with rents at affordability limits in certain regions of the UK, and much closer to their ceilings than they were 5 years ago in other regions - a shortage of supply would help even less!
The average renter is staying 4.7 years, now, in the PRS - so, the void - the enemy of the landlord - can and should be avoided! This is a key figure in your projections (compare this with HMO turnover rates, for example - not inevitable in every HMO, however - depending on your tenant types!). This is a critical metric that is overlooked far too often by investors, in my experience.
So - as I draw this week to a close, the next Property Business Workshop is filling up. As we turn our eyes to 2026, tickets are available! We start the year with a bang, discussing strategic planning and how to make the most of the next 12 months, with some of our own methods and takes on productivity and time management, alongside systems and processes. The other half of the workshop is about the most common pain point in SME property businesses - accounts, bookkeeping and group accounting. This is about measuring asset performance - not “how to use Xero”, but “how to make the most out of financial information” - what should you be seeing monthly, and how should you interpret it properly and use it strategically to grow your business, safely but quickly?
SUPER EARLY BIRD tickets are available for a couple more weeks with a genuine 20%+ discount off the face value. As always we have real life case studies about our own experiences, and close with our “no-holds-barred” Q+A. Anything individual to consider? Get a VIP ticket and join us for dinner, in a smaller setting with an opportunity to discuss any specific roadblocks or issues in your property business at the moment. That’s the best way to get a substantial conversation with myself, Rod and other experienced Property Business people! Join us! Thursday 22nd January 2026, Central London; https://tinyurl.com/pbwnine
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 and beyond - the landscape has been set for a surefire bull run. It will be slow(ish), and take a little while longer to get off the ground - and the amount of stock around is still keeping things suppressed at the moment - but as the market continues to improve slowly, it is a case of “here we go” in my opinion.
