Half Time Report

0:01Hey everyone, it's Rob B here with Rob D and you are listening to The Property Podcast. We're halfway through the year. We're going to look at what's happened, we're going to look at what the future holds and hopefully we're going to get you motivated for the rest of the year. Let's go.

0:20Welcome to The Property Podcast. Thank you for joining us. In case you don't know, we run a business that buys over£100 million worth of property for our clients every year. You can find out about that at propertyhub.net slash invest. In this episode, we're going to review the first half of 2025. How have things gone? How will things go? And most importantly, how can you, as an investor, make the most of it? We bring you a double helping of news this week, but they are related. The first one's from Property Eye, and it's got a really catchy title, Rob. Regulation blocking many prudent buyers from home ownership.

0:50I'm sure they could get a little more click-baity with that, but there is actually some interesting stuff in this article. yeah i see one of the sun's sub-editors are starting a new job over at property industry that's great stuff there so this story is saying basically it's basically addressing the paradox that we've just had this whole era of extremely low interest rates yet you have very few people becoming home buyers compared to what you'd normally expect so money was cheaper yet people weren't becoming homeowners what's going on well they're saying basically that the rules that were in place after the last financial crash to stop it happening again have worked too well.

1:27So basically throughout the whole period when interest rates were next to nothing they were stress testing against what will happen when they become much higher. Plus they had loan to income restrictions and all kinds of other things that made it harder for people to become home buyers and they reckon based on their analysis that 3.5 million people who otherwise would have become first-time buyers have ended up not doing that as a result not of the reality that they couldn't afford it at the time but because of the rules that were put in place but rob i think this is really interesting because let's assume this is true and it probably is then yes the rules have held people back perhaps unnecessarily from buying but at the same time it might have just saved everyone after the two years that we've just been through when interest rates have got up to what everyone had been stress testing against all this time so i don't know the issue well enough to take a position but it's possible that the rules actually worked i think you're right rob and i I think you make a great point that most people would miss.

2:20But a lot of people said when interest rates were going to go up, that it was going to be repossessions all over the place. I'm not dismissing that it had an impact on households and there would have been some repossessions. But on the whole, the market didn't collapse. Most people were able to absorb the interest rate increases. They had not liked it, but could do it. And the market carried on. What's really interesting in the second article that we have, and this is in The Guardian, is a proposal that interest-only mortgages could make a comeback and that's from the FCA. So the FCA are looking at ways to support home ownership and interest-only mortgages were very very popular in the last property cycle.

3:00So leading up to 2008 they made up nearly 40 % of all mortgages. Now they make up 4%. And there is reason for this because interest-only mortgages were frowned upon when all the dust had settled and everybody looked back at the craziness of that property boom that we had in the 2000s. And a lot of fingers were pointed at interest-only mortgages. I actually think it was more about the over-lending and the irresponsible lending. And it links back to that first new story we just talked about, where anybody could pick up a mortgage. There were 100 % mortgages available, very easy to get hold of. And not just for people with top-tier credit.

3:39for people who didn't have great credit as well could get close to 100 % mortgages at interest only. So it wasn't that they were available for the masses, it was that they were available to anybody pretty much at high leverage. Now I feel quite strongly there is an absolute place for interest only mortgages in the marketplace and I'll give you a real example. If somebody is getting on the property market, let's say they're in their late 20s, they're buying their own home and they get a repayment mortgage. The reason people say get the repayment mortgages so you eventually you pay your mortgage off but the chances are for the vast majority of people who buy that first home that is not their forever home.

4:18That is not the home that they are going to eventually retire in. They are going to do a few property moves over their lifetime and chances are every time they get a new property that mortgage goes up. So for the first few properties why not just make it easier for people to access the market, allow interest-only mortgages maybe up to a certain age for example where you expect people to continue up the property ladder for their first few moves and then introduce repayment mortgages later on in their life cycle. It would make a huge difference, it would allow so many first-time buyers onto the market, it would make it so much more affordable.

4:56There should be stress tests and they should be able to afford those interest-only mortgages But what it would mean is those people who buy a property, maybe only own it for five years, that first property, and then move on, can get a mortgage that better suits their needs. I think this is really needed in the mortgage market, Rob. I feel there's a big hole here missing. And interest-earning mortgages are available for some, but it's those with lots of equity and big incomes. So the fortunate few can take advantage of these products. But really, I think these should be aimed at the starter end of the market, and that would free things right up.

5:27Yeah, I agree. It's like they've taken the strictness of dishing these out and taken it out from a 1 out of 10 to a 10 out of 10. But really, there's a lot of room in the middle, which is what you're saying. Dishing out an interest-only loan to literally anyone for 100 or 110 % of what the property's worth, that could cause a problem. And it did. But that doesn't mean that it's a completely unsuitable vehicle in all situations. So I think you're right. It's a good thing this is being looked at. Okay, let's get into it. And I am saddened and indeed shocked to inform you that we are halfway through the year.

5:55How did that happen? To me, at least, it seems to have gone ludicrously quickly, but we are halfway through the year. And if that's come to a shock as you as well, and you're thinking back to all those plans that you made back in January about everything you're going to achieve this year, and you haven't got anywhere close to it yet, don't worry, we're going to help you out with that later in the episode. But Rob, before we do that, let's look at how the year has played out so far. We can talk about what we've observed in the market and our feelings around it and the vibes around it. But before we do that, let's look at what the data is telling us.

6:24Okay, so let's start with house prices. The data tells us that so far this year, property prices have gone up by 1.3 % and that's from nationwide. That's the index that we refer to the most on this podcast. If we want to quickly look at what we said would happen this year, so not for the half year point, but for the whole year, I said the market would be somewhere between 4 % to 5 % and Rob, you said somewhere between 2 % to 3%. Both of us could end up being right. Both are possible at this point. But has the market behaved for the first six months like we'd expected it to behave at the beginning of the year?

6:58For me, Rob, the answer is actually no. I think sentiment has been awful this year. And while that overall isn't a good thing, and I don't think it's exclusive to property, I think it's for the overall economy, but while that can be seen as a negative, there is also opportunity within negative sentiment as well, because it's a lot easier to do deals in this type of environment. And remember, the market is moving up. So it's not like it's collapsing so you can get yourself a deal. The market, even though it's a small amount, is moving upwards. But the deals that you can do because of the sentiment being so poor are really good right now.

7:32Yeah, I think sentiment's been so bad. It's remarkable that prices are up at all, as Nationwide says that they are. And this is very regionally driven. So this is a trend that's been firmly in place for quite a while. But this year, we've seen the market become even more polarized. We talked about it in our last market update. We've spoken about it several times this year already. Some of the incredible figures around the house price growth that is happening in some areas of the country, where demand is strongest, where affordability is best, the Northwest being the standout area for that, and just how much less affordable, more expensive, more Southern areas are struggling, with Prime Central London being the ultimate and kind of specialized example of that, but the same pattern holding in other areas as well.

8:13So how the market is feeling for you and how your portfolio is performing is probably very much dependent on where you live, who you're talking to and where your portfolio is. But yeah, on the whole, house price is up 1.3%. Also up 1.3 % by coincidence, Rob, rents. That's according to the ONS, but that's only based on five months data. It's a very small rental increase based on that data, which I wouldn't put too much stock in. If we go back to our predictions, I said that rents would be up four percent you said in a cop-out kind of way rental inflation will be higher than general inflation i think based on the halfway point you're probably going to be right i maybe it's going to be tight but one thing i think we can agree is that that period of insane rental growth that we've had for the last couple of years is over things are settling down now it is over the data shows us that and something miraculous would have to happen for that to change again what could that be?

9:07Well, a big increase in immigration. That's really what drove a lot of the rental boom that we had previously. We had record levels and then lo and behold, we had record levels of rental inflation because rents really is just supply and demand. Whereas supply and demand does impact property prices, it's just one ingredient of a big recipe that makes property prices move up or down. Where with rents, it's a lot more simplistic. It really is just supply and demand and at the moment that supply demand balance has meant that yes rents are going up but nowhere near as aggressively as they have over the last few years and unless something changes to that supply and demand balance i think for the rest of the year we'll see more of the same interest rates rob have been interesting we um made some predictions i said it would end between four and four and a half percent this year the base rate you said it would be 4.25 so far we've had two cuts and we're at 4.25 and it's widely expected it will go further.

10:07I think if we looked at it again today we'd probably make very different predictions because I wouldn't be surprised if it ended up sub 4 by the end of the year with the way things are going. That's interesting for two reasons. One everyone with a mortgage could be quite happy but then it does improve the dynamics and the figures around property for home buyers and for investors and we could have a window where yields improve even further and that could give a bit of a boost to the property market. Now, whether that happens this year or early next year, we'll see, and it may not happen at all.

10:37But if it does, we could see a stronger second half to the year. Probably the final quarter of this year on paper looks like it could be the strongest for property growth if we get the interest rate cuts that we expect. So interest rates always play an impact. But I really do think that that psychological shift of moving from a four to a three and that opening up borrowing options and giving people confidence to go out and invest and buy again could make a difference. I'm not saying we're going into some crazy boom, but could make a difference to the property market. Yeah, it's an interesting one because we've seen a couple of cuts.

11:10The market seems to think we will see a couple more cuts, which would take us sub four to 3.75. But inflation is still above target. So this is something I've said before about why you end up with you've got this 2 % inflation target. But actually, ever since there has been this target, the average has always ended up being higher. Because when it goes below 2%, it's disaster, quick, cut rates, print money, do anything. And when it's above, it's like, yeah, it should come down a bit. But you don't want to threaten the jobs market. You want to boost confidence. You want to get things going. So actually, if you have got inflation in the threes like it is now, no big deal.

11:46And you can still cut rates. That's a bit of a side point. And that's why putting yourself on the side of borrowers, which shrinks based on the rate of inflation, which is always higher than it's supposed to be, is a good thing to do. But yes, if we do both end up being wrong, and we do end up with a base rate of under 4%, then that is good news from a property investor's point of view, and may, like you say, create a window of opportunity. Because if we move on to talking about general market vibes, Rob, and we've already touched on this, it's entirely possible that we'll end up at a point when reality is looking really pretty good, better than it has done for a long time, but no one realises it, because we just seem to have this entrenched negativity.

12:24And if we look ahead to the rest of the year, I struggle to see what's going to shake that negativity off. I think people's mindset may lag the reality for quite a while. It's entirely possible. And that's why I said it could be the end of this year or next year, like the impact of an interest rate cut going sub four. I think that could make a shift. Again, I want to repeat, I don't think we'll suddenly get a booming property market. But let's talk about where the market is at right now. And I've alluded to the fact already that sentiment is low. but having been in the market for a long time now and engaging with both property investors and developers for a long time I would say that investors are reasonably happy and confident because they can do deals at least the educated ones and they seem to be fairly active but I would say sentiment amongst developers is up there with the worst I've known it in the last 10 years I would say it's not far away from the immediate aftermath of Brexit where everyone was like well we didn't expect that and the markets collapsed for a short period of time this market is not that far away from how people felt back then it's just very down developers are really interesting right and i know many listen to this podcast many people from the industry do they all tell each other that they're doing great but individually i'll have more frank conversations and we all know you're telling each other fibs because when i speak to the developers they are struggling that so many are struggling across the nation.

13:48I would say the Northwest is the most resilient market right now in terms of sales and transactions and confidence. But the rest of the country really is nervous and are open to doing deals because of that nervousness. But the fundamentals underneath haven't really changed from 12 months ago or 24 months ago. Not that much has changed. In fact, interest rates are lower now. But I don't know whether it's the leadership of our government or if this has just been compounded over time and we've got to this place, whatever the reason, sentiment is particularly low. As we said, can be seen as a negative and in a lot of circumstances it is, but it also creates that opportunity.

14:29And some of the deals we're doing at Property of Invest at the moment are amongst the best we've done for many years. And that makes sense, right? To paraphrase and butcher Warren Buffett's quote, be greedy when the markets are fearful, then property markets are fearful. they're not collapsing. So you get best at both worlds. You've got a reasonably stable market with interest rate environment going down, fundamentals solid, but sentiment nervous. And that's when you should strike. Yeah. And that's what we see quite a few investors doing because sentiment, like you said, among developers is very, very poor.

15:00Sentiment in the country as a whole seems really pretty negative. But the investors who we interact with don't seem too affected by it. We had an event for some of our clients the other week. I was talking to a few people about this and just picking up on what they were talking about, no one was in like, right, opportunity of a lifetime, fill your boots kind of mode. Of course not. It's not that kind of market. But no one was hesitant either. Everyone's just getting on with their plans. And over the past goodness knows how many years, we have seen the majority of the time, I'd say, a lot of hesitancy because there's always been something that people are worried about to some degree or other.

15:32But now we're at a point where the same group of people have nothing particularly positive to say about the trajectory of the country or the government or anything else. No one's feeling good about things in general. But when it comes to their investments, they're just getting on with it. I think it might be wrong because we've just been so hammered with bad stuff for such a long time that now we just hit a point where it's like, well, you know, you've just got to get on with it. And because there are so many good opportunities out there, there are great deals that we're doing. There are also great opportunities out there in the market in general because there's more stock on the market than there has been for years and years.

16:05There's more stock listed. There are more sellers than ever before and i tell you those sellers are reasonably realistic as well there are loads of deals to be done so i think for those investors who are in a well let's just get on with it frame of mind they're going to end up doing very well and while it's not an exciting time in the market it's like yeah things are up a bit here down a bit there whatever it's actually a really good market to be working in it is and there's a lot going on in the world at the moment but unfortunately there's a lot going on in the world negative wise every year and when you look back, let's say, in 10 years' time at 2025, you'll go, oh, there wasn't much growth that year, but oh, I did some good deals.

16:40It wouldn't be a big year for property one way or another. It was just a good year to do business. It was a good year to carry on building that portfolio. It was a good year to do a better than average deal. That's really what we're dealing with here. And Rob, I don't know how you feel, but I feel it'll probably be the same for the rest of this year. As I've said, if we're going to have a decent quarter, it'll probably be the end of the year and that's if we have one but it'll just be steady growth it'll be over two percent growth that seems a given right now with the way things are going there'll be some areas that perform really well there'll be others that won't again we've touched on that already it's a very much regional market at the moment and interest rates will come down further which will improve lending options which could set us up for a stronger year for growth next year we'll see I'm not going to start making predictions this early on 26, but I could see a world where that would happen.

17:33It's just a steady, unspectacular year on paper, but a good year for doing business. I think so. And like you hinted at earlier, it's great for us. A market like this where developers are open to deals and investors are still wanting to buy is amazing for our business. So long may it continue. But you said, Rob, in 10 years time, you'll look back at this year as the year that you did some great deals. I'm going to say something stupidly obvious, but that's only true if you actually do get out there and do deals. And we are at the halfway point. There will be a lot of people listening who back in January said, yep, this is the year when I'm going to do this.

18:06I'm going to buy my first or I'm going to buy one more, whatever it is. And because of the madness that is how we transact in property in this country, if they're not doing something very, very soon, that's not going to happen this year. And we always have this phenomenon that we see in September when suddenly the kids go back to school and everyone's like oh no the year's nearly over i need to do something now and everyone suddenly gets very motivated again but if someone is in that position now where the year is half over before they've even noticed it they haven't made the progress they want to what advice do you have for them oh rob if i had long sleeves on now i'd be rolling them up but it's summer so i've got a t-shirt on so i'll just pretend to roll them up and say stop telling yourself a story for the vast majority of people who haven't done it yet when they've listened to you then rob immediately their brain is giving them a story why they haven't yet and that story will make them feel better and that's why we tell each other stories stories are a part of human nature we love stories and we tell ourselves stories every day and if you haven't taken action yet this year and you plan to then you've been telling yourself a story while you haven't oh it's because of oh well i'm waiting for or with the market was this or this happened elsewhere in the world they're just stories stories that will make you feel comfortable but also make you poorer that's the truth the stories you tell yourself can either be great ones that will build your wealth and your success or ones that will steal away from your wealth success and all your ambitions and you'll go to sleep at night because of these lovely stories but don't listen to them immediately catch yourself when you tell yourself these BS stories because that's what they are and these stories apply to all aspects of life for all the goals and aspirations that you set yourself at the beginning of this year the year before and whatever else you've told yourself a story for the ones you've missed and that's all they are stories for you to make you feel better for everyone else they don't care no one cares about your stories only you do because it makes you feel better so get hold of that story get it out your head, throw it in the mental bin and get yourself motivated again.

20:14Whatever you are doing, whether it's property or something else, you're halfway through the year. If you've done nothing for the last six months, what's going on? You don't get many years. We don't get enough of these. Go and do something with it. Stop telling the stories in all aspects of your life that are holding you back and go and take some action. Buddy up with someone if you need to. Get accountability. We've talked about all the things you could do on the podcast to move forward so many times before but the one thing I beg of you today is get those rubbish stories out your head that make you feel comfortable at night when you go to sleep to why you're not achieving things because that's all they are that's all it is a bedtime story to make you mentally comfortable but it's when you get uncomfortable it's when you take the uncomfortable action that the big things happen so halfway the year's not dead it's not a write-off yet but it will be if you don't start doing things soon let's go glad i asked the question hopefully everyone's been presumably woken up by that i mean it's half seven on a monday morning rob i'm just happy that people don't get me on like a friday or whatever like they wouldn't be able to handle it no there's a reason there's a reason we record while you're still sleepy but like we said hopefully everyone else is feeling less sleepy because markets like this are when there are deals to be done and when there is progress to be made you might think that you want a hot market you do not want a hot market not if you're in buying mode anyway so that's where we are halfway through the year and that's how you can make the most of the second half of your year hopefully you'll do that now let's move on to hub extra at the part of the show where we give you that little bit more before we finish and rob i believe a feature of 2025 for you this year has been you've taken up a new hobby rob this is more than a hobby it's borderline religious it's it's called paddle oh my god right so this is the second time i've mentioned paddle on a podcast i played it last year and it was great played with the family good didn't play much more after that and then about two months ago i started to play again and i went to my local courts and i downloaded the app and that's the hub extra here it's not paddle itself is go to your local court wherever you play see what app they use there's more than one and download it because it is so sociable.

22:23I've met so many cool people by playing just loads of open games over the last couple of months of Paddle but you also get a rating so you can move that up and down. Mine's absolutely rubbish at the moment. I'm a beginner. I've only been playing two months although in my head I'm thinking what can I do to break the UK top 1000. I may not set that goal but the point is it's just super enjoyable. It's super addictive. It's obviously good for you because you're playing sport. It's really sociable. There's so many cool things about it and an interesting one. Last year I shouted out a podcast listener called Adam who said hello as I was exiting the court.

22:55Well I was playing one of my many games over the last couple of months recently and somebody messaged me to say oh can I join and the reason they messaged is because they were a much higher rating. I was thinking why does this person want to play with me but okay I'll learn by playing with better players and I was the beginner on the court. Luckily I'm pleased to say I didn't embarrass myself with these more experienced players and it was a good competitive game. anyway at the end of the game the person who paired with me one of the strong players said to me oh i didn't want to say to you before the game but you remember last year when you mentioned on the podcast that you saw a podcast listener he goes that was me i was like oh wow i'm so glad you didn't tell me before the game because that would have got right in my head thinking right i've got to repress now whatever so luckily he didn't we've got another game booked well mixing with loads of cool people in my area i really really recommend paddle fitness social competitiveness it's got everything and it's easy to pick up as well so do pick it up and because of the rankings you end up playing with people your level so hello to adam and a recommendation to you dear listener to give it a go i am pretty confident that if you play a handful of games you'll be hooked yeah it is a brilliant game and it's a game that people get obsessed with as well I know you'd like to get into things seriously, but I don't think you're alone here.

24:13I know so many people who've played it once and then got thoroughly obsessed. So yes, do check out the show notes where you'll find the link to the app, which unlocks the social side of the game, which is, as we've said, so big. But that is us done for this week. Thank you so much for joining us. Hope you're going your way informed and motivated. That's what we're aiming for. And we'll be back to do it all again next week. We'll see you then. Bye-bye. Bye-bye.