Residential Roadblocks

• Off the back of last week’s discussion about how the conflict in the Middle East was impacting the commercial property markets, Bull and Bear explore its impact on the residential markets. 

• There is little doubt that it has dented sentiment and has caused levels of turmoil in the mortgage market not seen since the disruption of the pandemic, or the infamous mini-Budget crisis in 2022. 

• Compounding the challenges currently being faced by the UK's housebuilders, was the publication this week of the Future Homes Standard. This sets out guidance for all new-build homes to include solar panels and heat pumps, or be connected to a heat network, by 2028. The consensus feeling is that these new standards will add even more red tape and cause construction costs to increase. 

• Bull and Bear have been given Easter Sunday off, so they will next be back with you on 12th April.

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Choking Point

• In a few short weeks, the US‑Iran conflict has already disrupted energy supplies and highlighted the fragility of the global economy.

• With UK 10-year gilt yields leaping to 5% on Friday, Bull & Bear assess how the markets have reacted and the implications for UK property investors.

• Development projects are most at risk, but the pair are comforted that property offers investors income resilience in moments of volatility.

• They both agree that striking a "deal" to bring the conflict to an end is an economic imperative for all parties.

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UK Offices - Build and They Will Come

• Following the news that the City of London has achieved a new prime headline office rent of £160 psf, Bull & Bear discuss how far this rental growth in the UK's prime offices could go. 

• The shortage of new build development across the UK is a concern to some and Bear thinks the Iranian war will further impact development viability.

• Despite this, Bull points out that prime rents seem to be exceeding minimum economic rents to make development viable and as tenants continue to pay top rents, the rental growth prospects show no signs of slowing down.

• On top of that, the signs are that the UK's regional cities are keeping comparative pace and could be on track to break the £60 psf mark soon.

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Downhill all the way? Absolutely Not.

• With the arrival of Spring, Bull is convinced that the time has arrived for investors to be back wholeheartedly in the market.

• However, Bear is in a sombre mood. He is concerned that the Iranian war will be a significant set-back to the recovery of the capital markets.

• Higher oil and gas prices, and general inflation, which will be driven by supply chain disruptions, are likely to deter any Bank of England interest rate cuts in the near-term.

• And … the prospects of the property sector’s principal benchmark (10-year gilt yields) falling are now looking very much less likely.

• Bull is undeterred.

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A Viability Crisis?

• In order to to try and forget about his beloved football team's current plight, Bull and Bear discuss John Lewis' decision this week to close its housebuilding business.

• They are concerned that if a trusted, well-funded national brand who is sitting on exactly the kind of brownfield and air-rights sites that policymakers want repurposed can't make housing schemes work, then there must be problems with the existing system.

• Whilst planning reform seems to be the Government's go-to answer, Bull and Bear believe the Government should also address the lack of affordable mortgage lending, as well as the sector’s rising taxes and regulatory costs.

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The Department Store Legacy

• After a bruising week of political and managerial sackings, Bull & Bear examine the legacy of the traditional department store as yet another House of Fraser prepares to close its doors for the last time.  

• The demise of so many department stores over the past decade threatened to leave gaping holes in the UK High Street. However, Bull & Bear are encouraged to discover how many former stores have been given a new lease of life and transformed in the process.

• The pair cite examples of legacy department stores being redeveloped into high-end residential apartments, student accommodation, offices, a hub for life sciences and even a whisky tasting experience.

• You can even try your hand at indoor-karting and urban street golf in some former department stores.  Now that has to be a silver lining!

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UK Life Sciences - Nursing a Headache?

• The news of British Land's agreement to buy Life Science REIT this week has got Bull & Bear talking about Life Sciences again.

• Despite British Land's interest, Bear believes the sector is under a bit of pressure at the moment. Venture Capital investment levels are down and big pharma companies such as GSK and AstraZeneca are focusing investment away from the UK.

• Bull thinks this may just be a passing phase, but both unequivocally agree that Government commitment to investing in the sector holds the key to kick-starting it again.

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Time to Think Small?

• Bear is having a moan about the growing imbalance between big and small businesses.

• Even though 99% of all UK companies (by number) are classified as micro or small, it seems that strategic and policy decisions are designed to favour larger organisations.

• Perfectly well-run smaller businesses (and funds) are being overlooked, abandoned, or swallowed up, in pursuit of shareholders’ ever-increasing demand for ‘Bigness’.

• When it comes to large businesses in a global context though, the UK is way down the pecking order. Our number 1 company, Shell, is only ranked 18th in the Fortune Global 500.

• Thankfully, a stronger pound recently has prevented even more (property) companies from being taken over by the Americans … at least for now.

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The Forgotten North?

• Bull had a trip down memory lane this week and has come away thinking that the North of England really does have plenty going for it.

• Perhaps Bull's biggest takeaway is just how many big, empty office buildings there are now on the main office parks across the region. As a consequence, some landlords are bailing out for whatever price they can get.

• However, the prime Newcastle city centre office market is a very different story, with rents rising 31% since the onset of the COVID pandemic. 

• The residential market is also performing well, with North East house price growth forecast to be the joint best performing region over the next five years.

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Staying Faithful to the Regions

• Bull is unimpressed by the underhand conduct of the former Shadow Justice Secretary, Robert Jenrick, who was rightly banished this week from the Conservative Party.  

• Bear is rather more sanguine about the behaviour of some of our more self-serving politicians.  But he agrees they'd make excellent candidates for the next series of the Traitors.

• After putting politics aside, the pair focus in on the UK Regional office market, which Bull is convinced is primed for growth in 2026.

• Bear doesn't believe that strong prime rental growth in the Big Six centres paints a true picture of the wider market.  But, when the pair dig a little deeper, they do agree that the limited pipeline for new-build offices now provides a window of opportunity to refurbish existing office buildings and capture significant rental growth (and value) in the process. 

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2026 Highlights

• Bull has created a calendar detailing the key events affecting the property world in 2026. This prompts a lively discussion around the really important events that will influence how the year unfolds.

• Bull points to changes to the NPPF and multiple predicted interest rate cuts as signs for optimism.

• Bear, who has already predicted that it will be another drab year, believes the recent events and murmurings coming out of the US might compound this further.

• The two agree that the first part of this year will undoubtedly be slow, but both have their fingers crossed that things could turn around for the second half of the year.

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Year-End Appraisal

• Bull is in the doghouse for his consistently over-optimistic market projections for total returns in 2025.

• His 10.5% forecast at the beginning of the year has proven to be way above the current IPF Consensus of 7.1%.

• Bull is happy to blame everyone (other than himself) for his over-exuberance and is stubbornly unrepentant.   

• Bear compares the state of the current market with the 1990s and predicts a grey outlook for the next 5 years. Neither good, nor bad. Just grey.

• Despite everything, the spread of their respective 5-year total return forecasts, at 8.00% to 10.50% is surprisingly close … and positive.

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Taxing Times

• With The Ashes seemingly over following Australia's dominant performance in Brisbane this week, Bull has already moved on to plotting England's routes to World Cup glories at the Football and Rugby World Cups in 2026 and 2027 respectively.

• Bear finally manages to drag Bull away from his new World Cup wallcharts and they continue their discussion from last Sunday about the Budget and, in particular, they focus on the likely impact on the housing sector.

• They feel that the Government missed the chance to properly support the sector and unlock much-needed development. Targeted support at the entry level could have made a big difference, particularly given that the OBR expect further falls in housing net additions through to 2027.

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Leaks, Glitches and a Sigh of Relief

• After months of anticipation, speculation, and leaks Bull & Bear are relieved that Budget day is finally behind us.

• The Chancellor has gone big on spending and even bigger on taxes, but she has at least doubled her fiscal headroom, prompting a sanguine response from the market.

• Bear is pretty miffed by Ms Reeves's new 'Mansion Tax' and is less than impressed that rates liabilities for larger commercial occupiers, including retailers, are set to sky-rocket after the imposition of a new 'super multiplier'. 

• However, Bull takes a more measured approach to dissecting the Budget, focusing instead on the big picture implications for the UK property sector.  If the Chancellor has indeed managed to calm the markets and pave the way for lower inflation, the Bank of England are increasingly likely to deliver a 0.25% cut in interest rates in December, with further cuts in 2026.

• That may be just the early Christmas present the UK property market needs!

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