John Stebik (3:15)

Yeah, I think the best way to think about rightmove is as a gauge of kind of market sentiment at best, because I mean, to be fair, if you compare what rightmove prices do to all the actual house price indices, then they do generally follow the same kind of trend, which actually has previously surprised me a bit because obviously this is the most optimistic take you can possibly get on house prices. But even so, it's also, it's quite like this jump is clearly because everyone was so gloomy ahead of the budget and had basically decided not to do anything up until Christmas was done. So it's just a moment more extravagant new year bounds than we normally get.

Maren Sumset Webb (3:57)

You always get a rise in asking prices in January, don't you? Because that's when everyone starts looking, you know, Christmas, new Year, new me, new house, suddenly asking prices go up and you get a lot more activity on the housing websites, et cetera.

John Stebik (4:09)

Yeah, there are reasons, I guess, for people to be a little bit more optimistic on house prices this year, or rather there's one reason, and that's the interest rates are slowly coming down. If you look at mortgage rates, they're basically the lowest they've been since September 2022 and interest rates shooting up. So now I was just checking kind of mortgage Best Buys this morning and you're talking about you can get a kind of, if you got a big deposit, you can now get a two year fix at under 3.7%. And if you don't have much equity in your home, you can still get a kind of 90% loan to value remortgage 5 year fixed for about 4.3%, you can get it for under 4%. And that is a big, big drop compared to the worst of the kind of peak after the interest rates shot up after the mini budget, et cetera, et cetera. So they definitely have been coming down and they may come down a bit more. And one thing that really does dictate house prices on average more than anything else is where interest rates are.

Maren Sumset Webb (5:18)

Interesting, isn't it? So, I mean, let's go back to last year, which was bad, bad for a lot of people actually. There was a survey from Hamptons out earlier in the month which showed that in 2025, 15% of Londoners, 15% of people who sold houses in London sold for less than they initially paid and the average across the country is about 9%. And I think those numbers, even those numbers would shock a lot of people who for years have believed that house prices only go up, that this is a safe thing to do. You can buy a house, you can buy a flat, even if it's a new build. And you know, you and I have railed against buying new builds for a long time on the basis that you buy with a massive premium, sort of 16% or so depending on where and how you buy what type of property. But it's around 16% premium to a second hand house. So the second you walk in the door, its value has fallen. You need very fast rising house prices to compensate you for not just that premium, but also the costs of moving. So most people would think that if they sit there for a couple of years, the price is going to go up enough that they can get out at the very minimum evens. And of course that is, we are finding again and again it is not happening. So this idea that it's becoming fairly common to sell well below the price you paid, it was a bit of a shock last year and the year before for people, wasn't it?

John Stebik (6:36)

Yeah, definitely. I think a lot of people, if I'm honest, don't actually realise that you pay a new build premium the same as you pay a new car premium. So I think that actually comes as a surprise to a lot of people. But also, yeah, the idea that you could have bought a flat or a house in London, mainly a flat, in 2015, and then actually have sold it for below the nominal price that you paid. Forget about inflation, not the real price.

Maren Sumset Webb (7:01)

Yeah, yeah.

John Stebik (7:02)

I mean, I'm not surprised that shocked a lot of people. I think the other interesting thing though is that it's weird because we've been moaning, or the country in general has been moaning about ridiculously high house prices for a very long time now. But the other issue with London is that I don't think enough attention was paid to the fact that after 2008, really it was only London and the southeast England that actually recovered sharply and then went on to higher highs. Pretty much the rest of the country never did that. And so I guess north of the M25 house prices last year went up a bit, and particularly the areas with the lowest prices have seen the biggest gains. So the northwest England, for example, was up about 5% ish. And so an awful lot. This is really just closing the gap between the two because London had a lot of factors after the financial crisis that really did see, well, a lot of global interest, because lots of global money was flowing in to escape from other parts of the world. And that kind of ran out of steam in about 2014.

Maren Sumset Webb (8:12)

And it's flowing out at speed now, isn't it?

John Stebik (8:15)

Yeah, well, that's coming from us. Yeah. And that's probably a big driver to London too.

Maren Sumset Webb (8:19)

Now, the other relevant thing to say on the matter of London and elsewhere is this business of flats in houses. So London obviously, like all big cities, has a big concentration of flats and over the last decade, the price of flats has gone up significantly less than that of houses across the board. So 80% versus about 40%. And that the falls in prices in flats, and particularly new build flats, are down to this. Well, the cladding problem, the service charge problem, all those ridiculous businesses of escalating ground rents, et cetera, et cetera, all those things have really hit the price of flats. And if you look at people talking about whether they would buy a flat or not, a lot of nervousness around the fact that a flat can be a liability, not an asset. Now then you. They've been built, the more likely they are to be a liability because of these service charges, the rising service charges, the cost of common areas, cost of, you know, gardens around, cost of. Of of roads in some places because they're part of the estate, as a part of the council's property responsibility. I remember the shock you had when we, when we did, from when we did our, our series on property, how horrified you were to find out what these things cost. Right, yeah. So that stuff makes an awful lot of apartments, flats into liabilities as opposed to assets, which makes a difference.

John Stebik (9:27)

Yeah, and that's massive. And I think the other problem is the more that that story is told, the more suspicious people become flats in general. And also, I mean, it's not just that. I mean, lenders are very cautious about lending to certain properties now kind of, that suffer from precisely those problems. So I know it's interesting because I think that. I do think one of the big things that's happened since 2022 to a great extent, is there's been a real divergence and the whole property market has fragmented in a way that we hadn't been used to for a while. And so you've got this thing where I mean even when we're talking about prices in London falling, what we're really talking about is prices of London flats falling. And also the very prime central, the really expensive stuff has fallen a lot because there are a few of those buyers. But can a bog standard London ish houses have probably not dropped extravagantly. It's probably just a bit. Again, you know, if you're talking about from an investment point of view it'd be terrible because you know, inflation wise they have, they have all fallen across the uk. But I think when we're talking about nominal price crashes, then that's mostly dodgy, unsellable flats rather than anything else.

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Maren Sumset Webb (12:26)

Pretty much all predictions this year have house prices going up 1%, 2%, 3%, 3 and a half percent. That kind of range so pretty presumably relatively flat in inflation adjusted terms. Right? And when we have looked at house prices over the last 20, 30 years, we always look at it in terms of interest rates. And we've said over and over and over again, you can go on about supply and demand as much as you like. I know everyone wants a house, but demand is not real unless you can actually afford to pay the price. And the more that interest rates fall, the more people can afford to pay the price. And that's what pushes house price up. It's the price of money as opposed to anything else. But it gets more complicated in the UK now because, I mean, not more complicated, it's still about what you can afford. But there are so many different streams of taxation that comes come with a house, particularly coming with a second home and with a buy to let, et cetera. So there's lots of avenues to house purchase that used to be less expensive in terms of regular demands than they used to be. So there's the double council taxes and you know, all this kind of thing. And then at the same time we have this, these restraints on incomes. So we have, and we've talked about student loans before and the extraordinary hit that people take with student loans and the fact that incomes have barely risen in real terms in the UK in the last decade. All these things kind of conflate together to me to say that even if interest rates do come off now, do continue to come off and mortgages are slightly cheaper than they were, they're still very significantly more expensive than they were before interest rates started to go up. So it's difficult for me to see anything happening rather than any at best, at best or first time buyer may say at worst, house prices, staying flat in real terms at least.

John Stebik (14:07)

I mean, I think that's true. I find it hard to disagree with that. And I think all the points about higher taxes, you know, and kind of graduate tax and all that sort of stuff are absolutely true. I mean, I guess one thing where I think this shows itself is the fact that the further north in the country that you go and also presumably the further out from Edinburgh, the Eagle in Scotland, for example, the more competition there is for houses that are still affordable. And that does make me wonder if people are actually just ending up paying more and getting less house these days than they used to. Because basically you've got a whole section of houses that are no longer affordable because you simply can't get the mortgage for them. And you've got this other category of houses where the competition has actually gone up because a lot of people have mentally traded down. It's like, well, okay, I don't need a third bedroom, we can cram all the kids in one bedroom and we'll sleep in the other bedroom type of thinking. Because that's what you, you need a house, you want a house. It's not as if rents have been particularly cheap falling though.

Maren Sumset Webb (15:17)

Rents fell last year, John. Rents fell last year for the first time in a long time. Very mildly. But they did fall.

John Stebik (15:22)

Well the other interesting thing about that is that's to do with migration going back to the pre Covid levels.

Maren Sumset Webb (15:29)

Is it though? I mean, you know the population of the UK still rose sharply last year. I mean it rose, you know, less than it did the year before, but still we're talking an enormous number of new people pouring in into the uk. I said it can't be just that.

John Stebik (15:42)

Yeah, but it was. Didn't we see a study that had flagged up that it was the kind of record levels immigration that had driven it up in the first place and then a bit of pressure off that. I mean, I'm not sure I'd like to look into that in more detail but I thought that was actually quite convincing and that's happened. Yeah, I'm absolutely not saying that migration has reversed.

Maren Sumset Webb (16:05)

Yeah, but you're right, level of incoming. Yeah, there was this very interesting study that. Well, not interesting because it was perfectly obvious, but last year showing that high levels of immigration affect rents much more than they do house prices obviously because new immigrants aren't necessarily competing to buy houses, but they're definitely competing to rent them. So it has a major effect on rents but not actually prices. Yeah. Well there's two more things I wanted to pick up on the subject then. The first is that this isn't just us, right. The house prices have had a difficult time in all sorts of places that are slightly similar to the UK. So Canada, New Zealand, etc. Have all seen something very, very similar. Flat house prices or falling house prices last year. And also there was. There's an interesting thing going on in Canada where there are an awful lot of funds, technically open ended funds that invest in housing and they are beginning to be closed because they've that classic problem. Classic problem, right, of putting illiquid assets into a fund, telling people that it's liquid, they can withdraw their money whenever they like, finding out that suddenly the market seizes up, prices start to fall, volumes aren't what they were. You can't sell the stuff at the price that you said you could sell the stuff to provide the liquidity. So what do you do? You close the thing. So that is happening there and it's yet another warning should anyone need not to tell people that illiquid assets can provide liquidity because they just can't. And we haven't had that much of that here. Although we have some.

John Stebik (17:33)

I was amazed to learn that those things were still on the go in Canada. I know, because, you know, Britain did it twice and eventually they died off after they, they were shuttled post Brexit having been shuttered in the gfc. And it was always obvious that it was a stupid structure.

Maren Sumset Webb (17:54)

I mean, I don't think Mark Carney.

John Stebik (17:55)

Even warned against him having all these regulators.

Maren Sumset Webb (17:59)

Well, yes, as they say, Mark Carney warned against it. And look where we are. Look where we are. So that was one thing I wanted to point out that, you know, if you think this isn't about interest rates, look everywhere else. That it has the same dynamic. It is. And the other thing I wanted to mention, which is not quite about house prices, but is relevant to what we were talking about earlier because of course, house prices are, as we say, relative to what people can afford to pay. You were pointing out on, on Twitter this morning that UK productivity is soaring. And you and I discussed this over and over and over again saying, you know, previously, if you heavily subsidize wages and wages are very low, how can you expect to have a productivity revolution? You can't. If labor is cheaper than investing in, in increasing productivity via capital expenditure machines, et cetera, et cetera. But if you put up the minimum wage and you vastly increase the cost of employment, might you drive a productivity revolution? We've been wondering about this. Maybe this is happening. But of course, the problem with this is that if the productivity revolution is forced by a sharp rise in the cost of employing people, the productivity is compensating for the cost of employment. It's not available as rising amounts of cash to pay out to people in income.

John Stebik (19:17)

Yep.

Maren Sumset Webb (19:17)

Which is a problem. Which is a problem because a productivity revolution should lead to higher incomes for people. Right. That's what's supposed to happen.

John Stebik (19:25)

Yeah, it's not good.

Maren Sumset Webb (19:28)

Anyway, so that's the add to our list of. I mean, I'm always thrilled to see productivity rising, but what I can't see is the transmission mechanism right now to people's living standards. Although that may come.

John Stebik (19:38)

Well, I guess the problem is. So productivity is doing more with less. But what's happening is that these companies are either getting shut down and therefore like productivity is going up because there are fewer workers doing the same amount of work. But it's not because it's because either those things were being run inefficiently in the first place, or it's because it's a kind of short term thing whereby you're overburdening your workers, you're reducing the quality of the service. So actually it's a productivity illusion because what's actually happening is you're stockpiling a whole load of problems for probably the next six months. Obviously there's a big issue. We measure productivity in a service related economy anyway. But I mean the other interesting thing is I think productivity has also gone up in the US recently. And part of this may also just be a kind of post Covid thing. You know, like Covid. Basically the whole python and the pig analogy where the pig moves through the python steadily and you know, it did it with the supply and demand of goods. It's probably done it with the supply and demand of jobs as well because companies have arguably been hoarding labor up until maybe the last year or so. So I definitely think that Rachel Reeves is driving up the cost of employing people will not have helped on that front. I think there was probably a natural unwind waiting to happen anyway in much the same way as interest rates have gone up globally and that's why they've hit house prices. So I think it'll be interesting to see what's going on in other countries and how long this productivity surge actually lasts.

Maren Sumset Webb (21:18)

Yeah. Okay, so house prices over the next year. Should people go out and buy a house now?

John Stebik (21:22)

Bargains to be had and only if they need one. And honestly on the investment. Well, yeah, well this is it. If you want to move house or you don't own a house, then sure, buy a house. Just make sure you can afford it.

Maren Sumset Webb (21:34)

Blah blah blah and bargain. Bargain.

John Stebik (21:37)

Yeah, investment side loan. I mean, it's been a long time since I thought buying a property for an investment was a good idea. And I don't see that changing. You know, I could be wrong, but I, you know, it's not something. Of all the opportunities out there, it's not one I'd be looking for at the moment.

Maren Sumset Webb (21:55)

No me to be honest. Thanks John. Thanks for listening to this week's Marion talk to you. Money if you like us Share rate, review and subscribe wherever you listen to podcasts. Also, be sure to follow me and John on X or Twitter marinesw and johnstepec. This episode was produced by Summer Circumstances and Moses Andam. Questions and comments and suggestions on this show and all our shows are always welcome. Our show email is merrymoneyloombird.net.

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