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  • Christian Armbruester


“No one beats Vitus Gerulaitis 17 times in a row,” said the Lithuanian Lion after finally defeating Jimmy Connors at the 1980 Masters and no market can defy us, having called it wrong for 25 years notwithstanding. Gone are the days when you paid seven million pounds for a tiny bedsit in Chelsea, where no wall is straight, and the plumbing never really operates to modern standards. That’s right, the UK property market is finally on its way down.

The big reason is of course the rather large elephant in the room. After more than a decade of cheap money, interest rates have risen by a breathtaking 5% in the last 18 months. What’s worse is that two-year Gilts are now trading at exactly the same yield as the one-year. That means mortgage rates north of 6% are here to stay, and it is simply killing demand, with transaction volumes down significantly from last year.

Forced selling is what usually gets the party started. In the next 12 months, 1.4 million UK mortgage deals are up for renewal. True to well-known consumer behaviour, these borrowers have been living it up knowing their household budgets are soon to explode. Excess spending on travel, festivals, and gaming were primarily responsible for the surprise inflation numbers we had in June.

Never fear, the politicians are here and there may just yet be worse to come. The Tories are likely headed for an election disaster in 2024, if the polls are to be believed. That will likely result in the end of the “non-doms” and an increase in private school fees, which means more rich will leave these shores. Before the 2008 crash, the UK house price to earnings ratio had expanded from an average of 3 in the eighties and nineties to just over 6. We now stand at 7. A reckoning seems imminent, if not rather pertinent.


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