Merryn Talks Money — Asking Prices vs Reality: The True State of the Housing Market

Date: January 21, 2026
Host: Merryn Somerset Webb
Guest: John Stepek, Senior Reporter at Bloomberg & Author of Money Distilled

Episode Overview

In this candid and insightful episode, Merryn Somerset Webb and John Stepek break down the disconnect between the widely reported rise in asking prices for houses and the reality of what homes are actually selling for in the current UK housing market. They dispel common myths around property investment, analyze the real impact of interest rates, discuss geographical market fragmentation, and evaluate why the dream of ever-rising house prices is being challenged. Along the way, they consider the impact of taxation, rents, demographics, and even productivity changes on the housing market outlook.

Key Discussion Points & Insights

1. Asking Prices vs. Actual Sale Prices

• Headline growth in January
  • Numerous headlines reported “the highest rise in house prices in January for 20 years.”
  • Merryn clarifies these are asking price figures from Rightmove, not actual sale prices.
  • Quote: “This has nothing to do with prices going up, or with paid prices going up, it’s all about asking prices going up.” — Merryn (02:22)
• Seasonal Bounce
  • January always sees an uptick in asking prices due to post-holiday optimism (“new year, new me, new house”) but this doesn’t translate directly to higher actual sale prices. (03:57)

2. The Role of Interest Rates

• Interest rates dictate market sentiment:
  • Mortgage rates are currently the lowest since September 2022, with 2-year fixes below 3.7% for those with big deposits.
  • Lower rates have reduced some “gloom,” but affordability is nowhere near pre-rate hike levels. (04:09)
  • Quote: “One thing that really does dictate house prices on average more than anything else is where interest rates are.” — John (05:16)

3. Reality Check on House Price Performance

• Capital losses becoming more common
  • 15% of London sellers in 2025 sold for below their purchase price; national average is 9%. (05:18)
  • The myth that “house prices only go up” is now being proven false.
• New build premium pitfall
  • New builds come with an approximate 16% premium; buyers often don’t realize this cost vanishes the moment they move in.
  • Quote: “You pay a new build premium, the same as you pay a new car premium. I think that actually comes as a surprise to a lot of people.” — John (06:36)

4. Regional Trends & Market Fragmentation

• London vs. rest of UK
  • London and the Southeast have seen sharper post-2008 recoveries and subsequent declines, while regions like Northwest England have seen recent gains (around 5%).
• Global inflows and outflows
  • London's unique dynamics, with earlier global capital inflows, have now reversed. (08:12)
• Fragmentation
  • The market is splitting—London flats, especially new or problematic ones, are struggling; standard houses fare better. (09:27)
  • Cautious lending practices and heightened suspicion about leasehold issues, cladding, and service charges are deterring buyers from flats, making many “a liability not an asset.” (08:19)

5. Changing Economics for Owners and Investors

• Taxation and affordability woes
  • Additional taxation on second homes and buy-to-let properties, plus stagnant real incomes due to factors like student loans, weaken demand regardless of supply-side factors. (12:26)
  • Quote: “Demand is not real unless you can actually afford to pay the price.” — Merryn (12:39)
• Outlook for prices
  • Analysts expect house prices to remain flat to up modestly (1-3.5%) in nominal terms, with real (inflation-adjusted) falls or stasis likely. (12:26)
• Investment warnings
  • John is adamant he “hasn’t thought buying property for an investment was a good idea for a long time” and doesn’t see that changing. (21:37)

6. Rental Market Dynamics

• Rents have dipped
  • For the first time in years, rents fell slightly last year, which John attributes partly to migration trends subsiding to pre-Covid levels (though Merryn disputes this as the only factor). (15:17)
• Immigration drives demand
  • Record immigration drives up rents (as new arrivals compete for rentals, not purchases), but has less effect on sale prices.

7. International Comparisons & Liquidity Risks

• Parallels with Canada, New Zealand
  • Other “Anglo” markets with similar lending culture (Canada, NZ) have also seen price stagnation or declines.
• Open-ended property fund danger
  • In Canada, open-ended housing funds are freezing withdrawals—classic liquidity mismatch as “illiquid assets can’t provide liquidity.” (16:05)
  • Quote: “Yet another warning should anyone need not to tell people that illiquid assets can provide liquidity, because they just can’t.” — Merryn (17:21)

8. Productivity, Wages, and the Future of Affordability

• UK Productivity ‘Surge’
  • Productivity statistics are rising, possibly due to firms shedding staff or increased capital investment—but “the transmission mechanism to people’s living standards” is unclear. (19:28)
  • Quote: “A productivity revolution should lead to higher incomes for people. That’s what’s supposed to happen.” — Merryn (19:17)
  • Both worry that increased productivity so far only offsets higher employment costs, not enriching workers.

Memorable Quotes

• On new build premiums:
  “You buy with a massive premium … 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.” — Merryn (05:36)

• On property investment:
  “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.” — John (21:37)

• On housing affordability:
  “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.” — Merryn (12:39)

• On rental market pressure:
  "[Immigration] has a major effect on rents but not actually [on sale] prices." — Merryn (16:05)

Timestamps for Key Segments

• 02:14 — Dissecting media headlines: Are house prices really up?
• 03:57 — Seasonality and sentiment in January’s asking prices
• 04:09 — Interest rate falls and their (limited) upside for buyers
• 05:18 — The shock of negative equity and new-build pitfalls
• 07:02 — Regional divergence: London vs. northern regions
• 08:19 — Flats: From asset to liability due to service charges, cladding, and ground rent
• 12:26 — House price forecasts, tax headwinds, and true affordability
• 15:17 — The surprising fall in UK rents and drivers behind it
• 16:05 — Migration’s effect on rents vs. prices; echoes in Canada and New Zealand
• 17:54 — The property fund liquidity crisis in Canada: a cautionary tale
• 19:17 — UK productivity: “Doing more with less,” but where are the rewards?
• 21:18 — Should you buy now? Only for necessity, say both hosts

Conclusion & Practical Takeaways

The episode concludes with pragmatic advice:

• If you need a home, buy, but only after careful affordability checks.
• If you’re seeking property investment, look elsewhere.
• The era of housing as a guaranteed “safe bet” for wealth is over—what matters now are affordability, interest rates, and the avoidance of flats with complex liabilities.
• Watch for global parallels and beware illiquid investment vehicles.

Useful for anyone navigating or simply trying to understand the current complex housing landscape, this episode equips listeners with a healthy skepticism for headlines and a toolkit for interpreting the signals that matter.