Podcast Summary: In the City (Bloomberg)

Episode: Where Are the Most Affordable Homes in the UK?
Date: February 20, 2025
Host: David Merritt
Guest: Stuart Hare, Chief Executive of Skipton Group

Episode Overview

This episode dives deep into the state of the UK housing market in early 2025, with a particular focus on housing affordability, regional disparities, and the policy landscape under the new Labour government. David Merritt interviews Stuart Hare from Skipton Group for an insider’s perspective on the challenges facing first-time buyers, the implications of changes to stamp duty, and the broader economic context.

Key Discussion Points & Insights

1. The State of the UK Housing Market ([01:47]–[06:06])

• Market Still Resilient: Despite broader economic gloom, the UK housing market remains strong, with house prices up 3% year-on-year and transactions rising over 20%, as buyers adjust to higher interest rates which are now gradually easing.
  • “People are getting used to the slightly higher interest rate environment and indeed those interest rates are starting to come down.” – Stuart Hare [04:52]
• Supply Problem Persists: While demand is picking up, the number of new homes being built is not increasing, keeping supply constrained and nudging up prices.
• First-Time Buyers Locked Out: Over 90% of prospective first-time buyers are priced out unless they can access substantial financial support, highlighting a “structural problem” for the market’s long-term sustainability.

2. Stamp Duty Shake-up & Its Consequences ([06:06]–[09:56])

• Reversal of Relief: Temporary stamp duty relief for first-time buyers (up to £425,000) is set to expire, with the threshold rolling back and affecting a much larger proportion of buyers: from just under 10% to 30%.
  • “Three times as many households are going to be impacted… the extra cost is going to be £6,000 more expensive.” – Stuart Hare [07:18]
• Deadline Rush: A rush is underway to complete purchases before the April 1st rollback, creating a “huge logjam of transactions.”
• Economic Implications: Hare argues that restoring the tax will suppress economic activity; the ripple effect of a home purchase (furnishing, renovations, services) stimulates local economies.
  • “You actually create economic activity around the actual purchase itself, which then leads to greater economic activity more broadly, which then makes up any tax shortfall.” – Stuart Hare [09:56]

3. Broader Economic Perspective & Growth Concerns ([10:29]–[12:45])

• Stagnant Growth: UK GDP growth is stagnant (~0.1%). Hare emphasises that short-term fiscal decisions must be balanced by long-term visions—otherwise, the UK risks “stagflation” and ongoing low growth.
• Need for Planning Certainty: Stability in planning, house-building policies, and a willingness to make tough, long-term investments are needed to foster economic growth and confidence in the housing sector.

4. The Planning System and Housing Supply ([12:45]–[15:27])

• Chronic Underbuilding: The UK faces a shortage of 1.5–2 million homes, impacting both owner-occupied and social housing.
• Mission-Based Approach: Hare stresses the need for government-wide, mission-based agendas that bring together planning, environment, and local authorities to coordinate large-scale building efforts.
  • “You need stable government… and you need this as a concerted effort.” – Stuart Hare [13:28]
• Political Will & NIMBYism: Overcoming local resistance to development (NIMBYism) is necessary even though it may be unpopular in the short term.

5. Regional Disparities in Affordability ([15:27]–[20:08])

• North-South Divide: New towns in the south are only part of the answer. More balanced development is needed to spread economic activity and housing opportunities nationwide.
  • “Levelling up isn’t about levelling down London…it’s about creating new wealth into the outlying areas as well.” – Stuart Hare [15:58]
• Skipton’s Affordability Index:
  • Most Affordable: Scotland (notably Aberdeenshire) stands out, with lower house prices paired with reasonable incomes.
  • Least Affordable: Not London or the Southeast, but places like Ceredigion in Wales, where very low incomes push even modest property out of reach.
  • Cities: Manchester’s centre has improved as more affordable homes and higher incomes have spurred urban renewal.
• London’s Exceptionalism: Higher incomes mean London isn’t the least affordable overall—but rental affordability, especially for key workers, remains a major challenge.
  • “London is, as always, unusual… There are pockets in London where you can get affordability.” – Stuart Hare [20:08]
  • “We need houses for those key workers as well. If not, there’s no point in us staying there.” – Stuart Hare [20:56]

6. The Outlook for Interest Rates ([23:22]–[26:26])

• Current Stance: At 4.5%, rates are “restrictive”—constraining borrowing and dampening growth to tame inflation.
• Forecast: Hare anticipates 2–3 more rate cuts in 2025, finishing the year with rates around 3%.
  • “Absent any major shocks, I think you’re looking at longer term interest rates, two and a half, three percent.” – Stuart Hare [24:56]
• Impact on Housing: Even with falling rates, fundamental supply shortages mean prices will remain high unless housebuilding increases significantly.

Notable Quotes & Memorable Moments

• “Over 90% of the people who are in the market to buy their first house and not be reliant on tenants or parents, they’re priced out of the market.”
  — Stuart Hare [05:26]
• “It seems ludicrous to us from a macroeconomic perspective to have this transaction tax penalize so many first time buyers.”
  — Stuart Hare [08:23]
• “If we’re too short termist… we are going to be a very low growth zone for quite a long time, if not even a stagflation zone.”
  — Stuart Hare [10:48]
• “You need central and local government working to quotas, working in collaboration to actually unlock the housing opportunities that do exist across the UK.”
  — Stuart Hare [14:27]
• “The reason we’re so passionate about housing… it’s a fundamental, for a little bit, the psychology of the UK, your own house… but also the economic activity within the UK.”
  — Stuart Hare [27:12]

Important Timestamps

• [01:47] – Opening remarks on the UK’s economic outlook and housing market resilience
• [04:52] – Stuart Hare on transaction trends and first-time buyers’ structural challenges
• [07:18] – Breakdown of stamp duty changes and their effects
• [09:56] – The multiplicative impact of house purchases on economic activity
• [10:48] – The risk of stagnation and the need for long-term planning
• [13:28] – The necessity of stable, coordinated government action on housebuilding
• [15:58] – Why “levelling up” isn’t just about London
• [17:23] – Explanation of Skipton’s affordability index and regional insights
• [20:08] – London’s unique affordability dynamics and challenges for renters
• [24:00] – The outlook for interest rates and implications for the market
• [26:26] – Supply and demand fundamentals keeping prices high

Takeaways for Listeners

• The UK housing market is robust, with strong demand partly driven by expectations of lower interest rates, but the imbalance with supply keeps prices elevated.
• The rollback of first-time buyer stamp duty relief is poised to impact tens of thousands, making homeownership even tougher for new entrants.
• Long-term solutions require political will, reforms to planning, and buy-in from both central and local governments.
• Regional affordability varies dramatically, with Scotland relatively accessible and some Welsh regions surprisingly unaffordable due to low incomes.
• Interest rates will likely fall, offering some relief, but without more housebuilding, affordability will not significantly improve.

This summary captures the essence and detailed substance of the episode, highlighting the core challenges, key policy debates, and regional realities shaping the future of UK housing.