Inside the UK Housing Market with Savill’s Lucian Cook

What’s shaping the UK’s residential property market as conditions continue to shift?

In this episode of Property Perspectives, Ashley Toy and Tom Sharman are joined by Lucian Cook, Head of Residential Research at Savills, to unpack a residential market characterised by uncertainty and competing pressures. With interest rates higher for longer, mortgage availability tightening and build costs continuing to rise, they explore what this means for house prices, transaction volumes and affordability.

The conversation also examines regional disparities, demographic challenges and the impact of the Renters Rights Act on landlords, tenants and investors, offering a grounded, research‑led perspective on the forces reshaping UK residential real estate — and what to watch as the market adjusts.

Transcript

SPEAKER_02 0:00

You know, death, debt, and divorce right now are probably the estate agent's best friends, which is you know not the most palatable thing to be saying on a podcast, but but it is probably the truth.

SPEAKER_01 0:08

Welcome back to Property Perspectives. I'm Ashley Toy, your host of this series. Um, across this series, I'll be joined by Tom Charman, our head of research at Now West. Uh, we'll be looking at all the major sectors, and today is residential. We are joined by Lucien Cook, Head of Research at Savils. Welcome. Pleasure to be here. I should say we were here a few weeks ago, but uh events have um passed us by and we're now back to do a very relevant and up-to-date one. So I guess for the record, today is the 7th of May 2026. We have a base rate of 375. We're probably in a higher for longer environment rather than a kind of gradual slope into a slightly lower place. Mortgage availability is very much a subjective term as lenders try and figure out how to kind of act in this market. Build costs are going up and are a challenge for everybody trying to put new homes into the market. So, for somebody that kind of famously has a challenge with short-term movements and short-term headlines, these are pretty important. So, how how do you kind of deal with that in the context of the residential market?

SPEAKER_02 1:23

Okay, so I mean I think when you talk about short-termism, the thing that I really hate is when people get fixated by monthly house price movements because often what you find is they will tell you as much about how much data you have going into an index and how heavily the index is manipulated as it will about what's really going on in the market. Actually, what happens in the short term in the market is really crucial now. I suppose what's more important is how long the pressures last, uh, the inflationary pressures last, therefore, what that means in terms of interest rates, and how the lenders price that into the cost and availability of mortgage debt as we've kind of covered. But there's little doubt that I think it was a couple of months ago that we were here. You know, things have changed dramatically at that point. We were baking in a couple of interest rate cuts, mortgage markets were stable, we had the prospect of a bit more deregulation in the mortgage market, and the expectation was a slow opening up of the housing markets, which would negate some of the issues around viability that we could see in the development markets. But you know, that has been that has been wholly disrupted. Uh, increase in the cost of fixed-rate mortgages. Um, you would argue that that probably has a bigger impact on first-time buyers who have really, in the recent past, been the part of the bedrock of demand, you know, in what has been a weak housing market, they've been a really important and relatively robust component of that. But in that environment where you have a bit more uncertainty around the path of house prices over the short term in particular, um, and you have a higher cost of debt, then their ability to get those higher loan-to-income and loan-to-value ratios is going to be it's just going to be that much more difficult, isn't it? So you can see that's where it's going to put some pressure, pressure on the market.

SPEAKER_01 3:16

So let's pause there, I guess, on the first-time buyer stuff. So you talked about pressure. Where do you think the biggest pressure is for a first-time buyer today?

SPEAKER_02 3:24

Um, I mean, I think it's it's clearly for those who have relied on the fact that we've seen a lot more lending at say 90% LTV ratios, or those people who were borrowing uh, I don't know, four, four and a half times their income to try and and um sort of get their first foothold on the market. I I mean I suppose in the short term, and again, this is the short-term, medium-term thing, and I think this is one of the reasons why it's going to take a bit of time for some of today's pressures to be reflected in the house price indices more readily. Um, you have a number of people with an existing mortgage offer, which now looks like pretty good value and on pretty good terms. Typically, they last for that six-month period, so they're quite keen to crack on within the market. And so it was interesting that given everything we're talking about, we had some pretty robust um mortgage approval numbers in March. The house price indices are yet to dip into negative territory in the main. Um, and I think you know that's partly reflection. So it's going to take a bit of time. I think it will take a bit of time for that to feed through. And of course, it also comes at a time when uh we've just had the the single biggest change in the regulation of the private rented sector that I've seen in my 33 years at Savills. So, you know, further disruption amongst the the buy-to-let market, particularly. Um, and and we've just done a piece of research which we pushed out over the weekend about the increase in the number of landlords bringing stock to the market, um, uh, which has been talked about a lot. You know, I still don't think it is the full exodus that a lot of people have talked about, but but definitely more have served Section 21 notices. That's a point at which they probably reconsider their options and they are bringing more stock to the market. And you can also see that in the balance of stock available to let and available to buy on the main portals at the moment. So that sort of reinforces that position.

SPEAKER_01 5:22

And all that's happened now then, you think that's or is there going to be a is that gonna drip out over the next six months, um six months or so?

SPEAKER_02 5:28

So I think it will probably feed through over a six-month period. Um, a lot of landlords served a Section 21 notice in advance of the Renters' Rights Act coming in so that they could keep their options open. Now is the point at which they look at their options, then it takes them time to bring that stock to the market. Um some of them will just re-let, right? They will work out, they can live with the regulation uh and they will relet. But I think you're probably going to see a bit of a bulge in terms of that activity. And of course, you take those two things together, and that affects a certain part of the market. It's particularly affected the flat market, I would argue, and most notably in London in the south-east, given where we are in the housing market cycle.

SPEAKER_00 6:10

Looking at the sales market more broadly, do you think that lower level of transaction volumes is just going to be kind of the norm going forward? So each time we feel like we're getting into an improving market as when we last saw each other, something comes along that kind of stymies that. But even beyond that, do you think that structurally there's the factors that will lead to lower volumes?

SPEAKER_02 6:35

Yeah, so I mean, I think the new normal is about 1.2 million transactions um a year. And that looks like where it's being post credit crunch. I would say a bit of mortgage regulation could open up the capacity for a bit more than that. Um you've got to have the right market conditions for that to take effect, and we just haven't got those at the moment with the with the with, I don't know, the RICS is always one of my favourite indicators in terms of what's happening to new buyer inquiries. That suggests that we have got a thinner seam of demand in the market, and I think eventually what you will find is that that translates through into transaction numbers. We always talk about the discretionary buyers stepping out of the market. You're much more reliant on the on the needs-based movers in a market, in a market like that. It's it's sort of quite a hackneyed phrase, but it does hold true in in these sorts of market conditions.

SPEAKER_00 7:29

Death, debt, and divorce.

SPEAKER_02 7:31

You know, death, debt, and divorce right now are probably the estate agents' best friends, which is you know not the most palatable thing to be saying on a on a podcast, but but it is probably the truth.

SPEAKER_01 7:40

So I guess within that, there's there are also those people looking to step up, maybe grow their family, maybe on the positive side of this. And I think you've referenced before in some of your reports the the gap between having your first home and your second home and the need to raise quite significant capital. Yeah. So what do you think these dynamics do to that equation?

SPEAKER_02 8:00

Um well look, I think there are a lot of um people looking to go onto the second rung on the housing ladder who have now had quite a prolonged period with very little house price growth. That means they haven't built up a significant cushion of equity. Their ability to do that has been how much debt they've been able to pay off on their mortgage as much as it has been around house price growth. And you've got some parts of the market where actually they might have put down quite a big deposit and a bit of loss in in terms of housing value is eaten into that equity. Now that makes it just much more difficult for them to make the next step up the housing ladder. And it it sort of means things like the bank of mum and dad don't just play a part for first-time buyers, it also plays a part for second steppers. Um, and where people have got to move up because they haven't got enough space, it also means that they will probably look to the next best market that they would have previously chosen, just so that they can secure that space, they can spread their equity a bit further with the mortgage debt that they're able to get. But you know, all of those things are are pretty challenging.

SPEAKER_00 9:06

Demographic trends seem to be so key in this, and there's in the you know, there's a large older generation from the kind of baby boomer generation. Um, thankfully, people live longer these days, but that means there's you know, there's uh more big family homes are kind of kept amongst the the older generation. So how do you you know how do you manage those kinds? Is it even possible to manage those kind of trends to ensure that young families, etc., are able to find the housing they need?

SPEAKER_02 9:34

Yeah, so I think the difficulty is that you've got people living for longer, they've generally paid off their mortgage and they're very reluctant to move out of the family home. Right. And and if you look at there's some really good data in the HMF from HMRC that comes out of stamp duty, and they make a pretty decent stab at looking at moving trends by age. And clearly you are moving much more in your 30s and early 40s, and in some cases the late 20s, than you are when you get to your 50s and 60s, and rates of moving then are very low, and that partly reflects this reluctance to downsize. But you look at the levels of under-occupation amongst owner occupiers, and they are continuing to go north, that means that we're making less efficient use of our housing stock. But as soon as you put something out in the press around encouraging people to downsize, you know that you're going to get some pretty emotive responses back from people. Anything that suggests that you're forcing people to do that is pretty unpalatable for a lot of people. So you've got to find other ways to address it, right? You've got to find some incentives actually to make downsizing an attractive option for those people. And I am and I'm not sure that we've cracked that within the retirement housing sector. Um it's probably it's not big enough, it's not diverse enough. We have seen some evolution there. So I think retirement housing in the rental sector is the big area that probably starts to open things up. But if you're gonna get, if you're gonna get those people lower down the chain to move, you need more downsizing because you need to free up the housing stock, but you also need some of that equity that's tied up in those underoccupied homes to pass down a couple of generations to help people move. And we've we've always been, you know, I'm I'm always interested in in exactly what are the right bank of mum and dad numbers. Because you start looking at at the amount that of deposit that some first-time buyers have got to raise, and it looks very it I it's difficult to see how that correlates with only say a third of people getting help from the bank of mum and dad. Now, whether that's because the definition's not wide enough, I don't know. But that's an area that we're going to be putting a bit of research focus into over the coming weeks and months.

SPEAKER_01 11:58

I guess just to like just to get into the retirement rental stuff. I guess there's the theory there that if you step out of your um your home, the big cost for you is stamp duty if you're downsizing. Therefore, if you're moving into rental, you don't have that, or is uh yes.

SPEAKER_02 12:14

Um I also um I just also think it's become a slightly more palatable option for people. Yes, we have a whole generation who are wedded to the concept of home ownership. And in some respects, the inheritance tax system plays to that because you have the additional allowance for people who are homeowners. Um but actually you're beginning to see when people look at the offerings that are available in the market, you release some equity, you use that equity to pay the rent, you know, you're not then necessarily leaving a legacy issue for the children in terms of the house that you've purchased. Um I think it's that probably where it's worked. A lot is made of stamp duty amongst downsizers, and yes, it's a barrier, but the there are much bigger barriers, right? The by far the biggest barrier is the emotional attachment to the family home. And that is why you and actually the complexity of moving, right? If you're in your 70s, or dare I say it, your 80s, moving home looks like a very complicated process, right? You need the help of your family members to be able to do that, and even then, you know, it's it's can be quite confusing. So again, that that just puts barriers in the way of this happening. So you've got to have some, I think you've got to have some carrots and some incentives for people to do it as much as a a bit of a bit of a push and a prod.

SPEAKER_01 13:38

Yeah. Um so I guess we've talked a bit around how people can try and I guess diversify what they're looking at. But we've talked about regional divide in the past. So do you see the regional divide staying through the current um goings on?

SPEAKER_02 13:54

Yeah, I mean I I mean I always well I can't don't always say, but at this point I would say that it feels like we're about halfway through the second half of the geographical cycle. Um so despite the fact for the period of the last decade London has been rebalancing rest of the U to the UK, it is still quite dislocated. If you look at first-time buyer deposits, if you look at the first-time buyer income in London, um, if you look at the gaps on trading up, then London is just in a different place to say the north of the north of England or indeed Scotland and and Wales.

SPEAKER_00 14:36

When we talk about you know it depends what what definition of London you use, doesn't it, clearly? There are many. But you know, whenever I look at first-time buyer data for London inner London, I think who are these people? Like, you know, I I don't, you know, so so in terms of there being a first-time buyer market in London, it's always seemed to me to be a slightly, you know, a moot point, isn't it?

SPEAKER_02 14:56

Yeah, I mean the inner inner and outer London are very different just because the values are very different. Um but often you find that the younger generations want to be in inner London because that's where they have fun as young homeowners. And I think that's one of the reasons why the average deposit for a first-time buyer in London is running out at somewhere around 130,000, 140,000 quid, and the average household income is around 100,000, right? It is because that's where a lot of the action is, and of course, you know, that's the curse of averages. Of course, it will vary across London, it will differ in some of the London boroughs, and it means that the less expensive London boroughs are more accessible, but still there is a significant level of dislocation, um, even with the context to the southeast. But take all of that together, and you would argue that there is um greater capacity to withstand some of the affordability pressures that we face in the short term, um and and indeed capacity for further house price growth the further you are away from London as things stand.

SPEAKER_00 16:07

I mean London price it again depends which numbers you look at. And you know, your sales at Sales have a range of different London metrics, but prices in some markets haven't moved or haven't increased net of 2014 or so in nominal terms. So you know, you know, I often used to think when you're looking at the housing market, you know, what what do we as a country want? And I thought, well, nominal value staying flat for a prolonged period of time as earnings rise would be a good thing. But the the and that is really what we've actually had for quite a fairly prolonged period um post the COVID boom. But that doesn't work for developers, does it? So, you know, you you've got a situation where house prices aren't rising in nominal terms, yet build costs are rising. Um land prices aren't going down. Yeah, so so how how does that so in a situation that should be in theory good for homeowners in that their earnings are moving away from prices, which is good, doesn't work with for developers.

SPEAKER_02 17:05

So No, and I think that is a reflection of the fact that the costs of development have gone up substantially over the recent past. So a combination where you have minimal house price growth and prices falling in real terms and build costs going up because the cost of materials and labour are going up substantially, let alone the policy inflation that comes from biodiversity, net gain, future home standard, increasing desire to get things as energy efficient as you possibly can. You know, that creates a very, very difficult situation around viability, which is the underlying reason why we have seen substantial shifts in planning policy, which are not bearing fruit in terms of the number of homes that are being delivered. The viability issue is outweighing the planning issue. And I think it will take I I think a lot of the planning changes that we've seen under the current government have been for the good, but it is going to take a lot of time for them to bear fruit, and they're not going to do so over the course of this parliament, I would venture. Because the viability issue is acute. You know, you you've probably locked into your land value at yesterday's values, and you're trying to do it, and you're trying to get the development through on today's viability, and and that just isn't going to work in a lot of circumstances.

SPEAKER_00 18:32

I also think you're going to put your neck on the line and say that the 1.5 million over the five years is not going to be delivered.

SPEAKER_02 18:37

I don't think that is outrageously putting your neck on the line, uh, because I don't think anyone believes we have um uh any chance of getting to that number unless you suddenly have a huge um public sector house building programme. That's the only way that you can do it. Um, or you go down the less politically palatable option and you have a sort of very, very significant demand stimulus to get to the 1.5. You know, we said last year we thought it might be closer to 840,000. Um and you might just argue at today's point in time, given the latest disruption in the housing market, that even that looks like a toppy um estimate. Um and that's not to say that actually what's been done on planning isn't isn't good news. You know, I think a lot of the building blocks have been, forgive the pun, a lot of the building blocks have been put in place to increase housing delivery, but it sits against the context of the of where we are in the market. Um and those bill costs which have just gone up in line with underlying levels of inflation, those that has been compounded by increasing requirements put on house builders. And a lot of people would say, well, why doesn't that just feed through into development land prices? Unfortunately, the development land market isn't that efficient. Um, and it takes time for that to drip through through. And if you have a situation where the first reaction of the ha house builders is to say, well, let's just curtail production to a degree, then the demand for land um eases back, um, and actually what you just see is less homes built.

SPEAKER_01 20:22

Yeah. And you don't have the land, I guess the landowners are not they're not in a desperate position to sell the vast majority, so they will just hold on until Yeah.

SPEAKER_02 20:29

Well, this I think there's two things. You know, one they will just hold on until they feel market conditions are right. Um and or alternatively, you suddenly find that the residential development land value sits below the value of alternative uses. So why on earth are you going to press the buttons in those circumstances? And I think those those perhaps are the the bits which um if you're looking at it from a distance, it's quite difficult to understand or get your head around. Once you get your head around those, you start to understand that an imperfect land market with competing uses means actually the net result is just a fall in in production levels.

SPEAKER_01 21:10

So it's hard to get through any conversation today without talking about AI. There's a headline the other day of they're going to use AI in the planning system to try and unblock it. My sense is that's probably not where the bottleneck lies. But do you have a do you have a take on it?

SPEAKER_02 21:23

Um well I you would imagine, assuming AI is used appropriately, and we all have views on that, and we all have examples where it's thrown out a few hallucinations. Um but assuming that can be harnessed, then it should create efficiencies within the planning system. I think the best thing you can say is, my God, it's needed. Um, because uh you have got a situation where the local planning authorities are heavily under resourced, both in terms of the amount of labour at their disposal and perhaps the experience of the individuals who are who are in uh who are in. Post and I think you also have this, you know, we're sitting here, it's local elections today. You know, I I got into the village hall um in Hampshire this morning at 10 to 7 with a keen eye on when to get my train, and they said I wasn't allowed in yet because it wasn't seven o'clock, so that started my day absolutely wonderfully. Um, but you are going to end up with a situation where you would imagine um the uh that reform and the Greens are gonna pick up more seats, and I think what that is likely to do is create a bigger wedge between national central government ambitions around house building and the desire to do that at a local authority level. So I you know, I think again, I think that whilst you want to get more planning consents through, there's going to be more friction in doing so. I still think you've probably got the best planning environment, purely as a planning environment, again, that I've seen over the course of my career. If you look at where central government policy lies, the difficulty is you've got a disconnect. So you can get the consent, but you're gonna have to be really persistent. You're in many cases gonna have to go to appeal, and there's going to be plenty of bumps in the road along the way to get there.

SPEAKER_01 23:20

Well, you've you've called some of the local elections there, so by the time this comes out, we can we can fact-check you.

SPEAKER_02 23:25

Yeah, we may have to do another re-report, which I think all of us will be delighted about.

SPEAKER_01 23:29

We'll come back in a few weeks. Indeed. Um, so I guess just to kind of finish off, I guess, on on the build side. So do you feel like there are any cost pressures out there that are yet to hit to make that equation even more acute? Or do you think they're baked in today?

SPEAKER_02 23:45

Yeah, well, we had a report out from the HBF, didn't we? Uh, which was, I think it came out yesterday, where they were putting a figure of in excess of £70,000 in terms of increased build costs over the relatively recent past. It looked like about half of that was just down to materials and labour inflation, and the rest of it was in relation to policy-led inflation. Um I think the developers will largely have have baked that in, but the consequence is that it's just impinged on viability, uh, you know, as we've discussed previously. And it will if if the land market is able to price that in, that is going to take a whole lot longer, you would imagine.

SPEAKER_01 24:27

And I guess the point is there, they've baked in a scenario, which is the most likely scenario is there are bookends to those scenarios that could play out to the good or too.

SPEAKER_02 24:37

Well, completely, right? So you know, in some ways you're in this slightly bizarre situation now where you've had this big chunk of increasing costs through um policy. You're unknown from this point is what are the underlying inflationary pressures going to be on those costs. You know, and that's the million-dollar question, whether or not you're factoring in how much it's going to cost you to build a home over the period of the next 18 months, or whether you're trying to work out what mortgage rate you should be offering on a five-year fix. You know, it it is essentially the same problem, which is uncomfortable.

SPEAKER_00 25:09

Yeah, so so trying to hedge your bill costs or trying to hedge your financing costs is is already more expensive, regardless of what actually happens going forward. So, so you know, if if we're going to be building less or a low number and we're gonna be, you know, sales volumes are gonna be low. One of the potential winners in that scenario, uh investment uh investors, landlords. Um you mentioned earlier the the Renters Rights Act that's just kind of come into force. So can you just give us the basics of what the Renters' Rights Act is and what that means for landlords?

SPEAKER_02 25:44

Yeah, so um in essence, you know, the single biggest change within that is the abolition of Section 21, which means you cannot get to the end of a tenancy term as a landlord simply serve two months' notice and get your property back. So that gives tenants far more security of tenure. Landlords are still able to recover possession where there's substantial breach of tenancy terms, including non-payment of rent. They can still get possession back if they want to put their property to the sales market, or if they want to re-occupy that property or a close family member. That's the broad brush of it. But there's a lot more in the detail. So if you are going to exercise those notices, it takes longer. And there are then restrictions. Let's just say you want to sell the property, you you're trying to sell it in weak market conditions, you can't. You can't then bring it back to the rental market for a 12-month period. Right? So the accidental landlord is suddenly going, This is looking, given all of the regulation I've got to deal with to get the property on the rental market in the first place, and the lack of flexibility that I have around that property, um, I think a lot of the accidental landlords are going to say, is it worth the candle? But more than that, I think it's the smaller, more indebted landlords who have had it as a side hustle, I think is the phrase that the kids on the street are using at the moment. They've had it as a side. You know, a lot of them are saying, Well, look, I'm not seeing the capital growth. The income returns are now pretty tight in a higher interest rate environment. And it's that which is just making people question whether they're going to stay in it. It's that which means that we have have got more previously let stock on the sales market at the moment. The interesting thing is how many of them will actually sell in today's market conditions, and some I think will actually not. Um, and I I suspect that some stock will just stay on the rental market and they'll rely on some of the other options embedded in the Renters' Rights Act. But, you know, what's the consequence of that? I think the consequence is, firstly, the sector becomes more dominated by larger full-time landlords with lower debt requirements, uh, and it opens up the opportunity for the institutions, but really only when guilt yields start to come down. Because they are carrying, when they look at that as a new investment, they're carrying development and operational risk, and it it works in a lower a lower um bond yield environment, it's more difficult to make stack up. And we've seen that in a in a lower number of built-to-rent starts on site. The operational stocks proved pretty fruitful. Yeah, it let up well, um, probably exceeded expectations on rental growth, but it doesn't quite look like that for the stuff that you're you're putting a spade in the ground on right now.

SPEAKER_01 28:39

Yes. So I guess in in that context, if you're a professional landlord today, if you were to rate the impact of the renters' rights act and your confidence to get through it, how would you kind of go about that?

SPEAKER_02 28:51

Um I I think you probably, as the professional landlord, you've you you've seen this coming, right? This has been signposted for a long time. It was you know, Michael Gove put his version of this to the parliament in what 2023? Yeah. Um I think it might have been May 2023. So they've been building up to this for a long period of time. They would have looked at their portfolio, they would have looked at what's good and what's bad, they would have had a mind to the fact that they're going to have to get it to EPC level C by around 2030. So they start looking at what's giving me an appropriate yield, how much debt can I carry on this portfolio and still make a decent profit out of it. They already have put it into a corporate structure. They've probably moved their portfolio around or rationalized their portfolio. Um for some of them, this is going to be an opportunity. So for some of them, they're a full-time landlord, they're committed to the sector, it's how they make their money, they're pretty good at what they do or very good at what they do. They'll see some stock coming out from elsewhere and they go, I can pick that up, put it into my portfolio and really make that work, where the smaller landlord can't. And I think for those guys, the bigger the portfolio, the more they can spread their tenant risk or their property-specific risk. And the the better able they are through economies of scale to deal with the regulation. And when they improve the energy efficiency, they learn from their first one, apply it to their second one, and then to the next 10. So that I think is where the environment is less restrictive for them.

SPEAKER_00 30:28

So there were there was some there were some kites being flown just recently about rent controls, but I assume you don't expect anything like that to happen anyway.

SPEAKER_02 30:36

Yeah, I I think it became very, very quickly apparent from the response in the media, of which I was clearly part, um, that that was not going to be a particularly good idea in terms of the availability of rental stock on the market, it was clearly going to spook landlords, it was shut down very quickly.

SPEAKER_00 30:56

Yeah.

SPEAKER_02 30:56

Um and indeed it had to be, because there are consequences for tenants here. Let's not forget that. You know, if you are a tenant who has got a property that suits your needs for the next five years, uh, perhaps you've got young children and you've in the property, then it works well for you. If you're somebody looking for somewhere to rent, this is not working nearly as well for you because you're going to have less stock to choose from. And you will probably be at the sharper end of any increase in rents that results from that. Um, so um, yeah, so there's you know, for even for the for the for the private sector tenants, I think there are some unforeseen consequences that are gonna come out of the woodwork over coming years.

SPEAKER_00 31:43

So it's the rental the rental growth constraints, as it were, or the guidance, the governance around um increasing rents that exist within the Renters Rights Act obviously less extreme than than rent controls. So, how do you see those constraints affecting the market?

SPEAKER_02 32:00

Um so essentially you've there's two bits in there, isn't there? One, uh you can't have bidding wars, which means you can't accept a rent above the asking rent. If you're a private landlord, what are you going to do in response to that? Right? Because you need to stay a market rent so that you can benchmark all of your future rent reviews, and you need to be at the market rent to start with to make sure that any increases off that keep you in pace with the market. So you're gonna you you're inevitably you're gonna see a bit of an increase in asking rents, just to so people know exactly where the market level of rent is. They will let the market operate beneath uh between beneath their um beneath their asking rent. And then the second part of it is around the rent review process. And I think this is an area which is quite sticky for landlords because you propose your rental increase, the tenant then has the ability to contest that, and the new rent only takes effect if they do contest that from the date that the tribunal makes their decision.

SPEAKER_01 33:05

And again, AI is coming into that because they have ready access to all the advice.

SPEAKER_02 33:10

And a little bit of social media.

SPEAKER_01 33:11

Yep.

SPEAKER_02 33:12

So if if you are a tenant, there is the prospect that you're gonna, well, I'm gonna contest it, particularly if the landlord hasn't given me enough evidence, because I reckon it's gonna take three months for the tribunal to get around to having a look at this, and they're probably under resourced, so I probably it's probably gonna take me another month or two before we get the result. Hey, Presto, I've delayed my rental increase for a bit. Now the government has said if that transpires and that happens in the majority of cases or a lot, then we'll have another look at that. Because I think the one of the biggest issues for a lot of landlords is you've put the legislation in place, we understand why you've done a lot of it, but have you actually put the machinery behind it to deal with this new environment? Uh and that there you certainly can have some sympathy with the landlords as to whether or not that's being put in place.

SPEAKER_00 34:02

It's going to be huge volume going through the tribunal system, isn't it? You you think that you know institutional landlords you would imagine will work out the kind of go forward standard annual rental increase. They think they can get away with, and that will just be a standard across the board um approach.

SPEAKER_02 34:18

Would you would you think that's Yes, um albeit that it has, you know, they can't just apply a formula, it has to be by reference to open market level. So you might be saying, Do you know what? I think we're at 3.5% over the course of the past year. That's what we're going to put through, but you've got to have some market evidence for that. I think what you're probably going to find is that landlords certainly at the at the start are going to just give a load more comparable evidence to support their rent. And I think they probably need to do that to make it very, very clear that they're not being unreasonable in terms of what they're asking for. So they can't be able to do that.

SPEAKER_00 34:55

So if you're an institutional, you know, if you're an institutional bill-to-rent investor and you have relatively modern stock, what are the comparables? So I guess that's new stock being delivered because you're outside of the PRS market.

SPEAKER_02 35:07

And it's and it's the churn that you have within your existing portfolio.

SPEAKER_00 35:10

But it's a chicken and egg thing, isn't it? So someone needs to set that rent first in order to have the comparable. So I guess what I was thinking when I said about standardizers, that you work out a number at which most tenants can't be bothered to make a fuss about it, a bit 2% or whatever, what a level may be.

SPEAKER_02 35:27

Which is fine until you find that over a successive period that starts to act on the drag and it becomes out of kilter with the true market rent. So at some point you you've got to put draw a line in the sand and say, we're going to look at our portfolio and we're just going to benchmark this about what we know is going on in the market. But the longer it goes on, the more you have the lettings, the more you have the evidence. And the institution investors are going to have more evidence than the smaller private landlord at their fingertips. Particularly if their stock is broadly similar in nature.

SPEAKER_01 36:01

So we've talked a lot about stuff that's happening in the relatively short term. As we draw this to a close, I'll ask you a bit of a longer term question. So if we're sitting here this point next year, what are we talking about?

SPEAKER_02 36:12

Wouldn't it be lovely to be absolutely sure about what we're going to be talking about? Let's hope that we're talking about a burst of inflation that was relatively short-lived, which allows the mortgage markets to normalise a little bit, stabilize a bit, and start to see the cost of mortgage debt come down. That I think is our hope. And it looks like that's the central scenario of most economists, partly because Trump wants to get a load of stuff done by the midterm. And you can see as we sit here today on the 7th of May, we've got to say it out loud because things are changing quite quickly. It feels like there's a bit of urgency in the US to put this to bed. If that's the case, I think we're going to be talking um more about how mortgage deregulation of the mortgage markets is affecting the shape of the market. I suspect we're going to actually be talking about how long the tail effect is of the events that we're seeing today. Because I think it takes quite a bit of time for that to play through in reality.

SPEAKER_01 37:18

We almost ended on a complete positive there. But we'll take we'll take that and we'll get we'll come back in a year and see what. Thank you very much, Lucy. That's it for another episode of Property Perspectives. If you've enjoyed this, please click like and subscribe.