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Starmer must choose between instinctive politics and an urban housebuilding recovery

Making sense of the latest trends in property and economics from around the globe

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4 mins read

The UK's annual rate of inflation to 3.6% in June, up from 3.4% in May. Economists polled by Reuters the rate to hold steady at 3.4%. 

That's a bit of a setback but remains broadly in-line with forecasts from the Bank of England (BoE) suggesting inflation will peak at 3.7% between July and September before receding. There were a few worrying signs in the data; services price growth, a key source of concern at the BoE, held steady at 4.7% rather than cooling as expected, for example.

Nevertheless, BoE policymakers have in recent weeks that the weakening of the jobs market is becoming their key cause for concern. A Monday by the Recruitment and Employment Confederation and accountants KPMG showed that the jobs market cooled sharply in June, while the number of people available for work jumped at the fastest pace since the pandemic.

Investors put of a 25bps cut at the August 7th BoE meeting at about 90%, and expect another reduction before the end of the year.

Very low inflation

Higher goods prices as a result of tariffs imposed by president Donald Trump are in US inflation data. The headline rate climbed to 2.7% in June, from 2.4% the previous month. 

"Big increases in June in prices for goods, like toys, sports equipment and appliances, that are mostly imported," Samuel Tombs, Chief US Economist at Pantheon Macroeconomics, .

This is a negative signal for the US housing market. After declining for five consecutive weeks, the 30-year fixed-rate mortgage last week following a stronger than expected jobs report. There is almost certainly more to come: the 30-year Treasury yield climbed above 5% for the first time since early June following that inflation print, "and there were large flows seen in options bets... that target a jump to around 5.3% within roughly five weeks." Bloomberg. "The rate on the long bond hasn’t been that high since 2007." 

These conditions, should they be maintained, will tee up a dicey showdown between Trump and Fed chair Jerome Powell. "Fed should cut Rates by 3 Points. Very Low Inflation. One Trillion Dollars a year would be saved!!!," Trump posted yesterday. 

Off-plan sales

Housebuilding figures from consultancy Molior London continue to show a market approaching a standstill. Ollie Knight has the details here – there were 731 private housing starts across the whole of the UK capital in the second quarter of this year, the lowest number on record. In the first six months, work started on just 2,158 private units.

As Molior's Tim Craine , Deputy Prime Minister Angela Rayner wants 176,000 new homes built in London during 2027 and 2028. Current projections show just 9,100 private completions over that period.

I wrote about the mismatch between the government's instinctive politics and the realities of running the British economy. In that case, I was referring to the heavy-handed taxation of the wealthy, but treatment of investors in UK residential real estate is another good example. Off-plan sales are a crucial tool for London developers – they seek to pass a certain sales threshold before starting construction, but successive changes to taxation implemented initially by the previous Conservative government have cut investor numbers dramatically. 

Demand-side reform

Without introducing better incentives to buy off-plan, officials will find it hard to spark a real recovery in delivery, but anything perceived as a hand out to those able to purchase multiple homes will face resistance. And of course, any incentives would be far from a silver bullet. Demand side reform will do nothing to improve affordability in the capital, and there are all sorts of other problems hampering the system, again Ollie' piece linked above has more.

You don't need to take my word for it – Barratt Redrow this week said 16,565 homes in the year through June, short of the previously guided range of 16,800 to 17,200 units set in April. 

"Our adjusted profits are in line with market expectations, despite home completions being slightly below our guided range, mainly due to the impact of fewer international and investor completions than expected in our London businesses," said chief executive David Thomas. 

In other news...

The second quarter of 2025 was the most favourable market for buyers in the UK Country market for seven years, writes Tom Bill. 

Elsewhere - Non-dom exodus hits London market for butlers (), thousands of lower earners to be eligible for mortgages in shake-up (), ever-higher taxes ‘bad for growth’, OBR warns Reeves (), HMRC does not know how much tax billionaires pay, say MPs (), and finally, Wall Street is investing billions in marinas for bigger yachts (). 

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