UK Economy
Better than expected news on the UK economy has given the Committee (and Burnham’s new cabinet) some breathing space. Inflation (CPI) fell back to 2.6 per cent in the 12 months to June, down from 2.8 per cent in May. Fuel and food underpinned the lower than anticipated figure.
But the good news on inflation is expected to be short-lived. Increases in the energy price cap (up 13 per cent from July) and uncertainty in the Middle East have resulted in crude oil prices again exceeding $90 per barrel. As a result, expectations on inflation have increased for H2.
News is mixed on the employment market too. On one hand the unemployment rate remains at sub 5 per cent, standing at 4.9 per cent in the three months to April. But there are more people looking for work than jobs available and youth unemployment remains a significant challenge. The latest figures from the ONS suggest more than 1 million under-25s are not in education, employment or training (Neets), equating to one in every seven people in that age group.
Mortgage market
Mortgage approvals recovered in June, increasing 2.9 per cent to 58,200, according to the Bank of England. But this follows a slow May, when approvals fell 13 per cent—the steepest monthly drop in 44 months. Despite the rebound, June's figure remains 10 per cent below the ten-year average. Year-on-year approvals fell 6 per cent.
But ongoing uncertainty around inflation and energy costs means mortgage rates edged up. The Bank of England ‘effective’ interest rate—the actual interest paid on newly drawn mortgages—increased to 4.35 per cent in June from 4.22 per cent in May. Several lenders have increased their rates in recent days, with Moneyfacts reporting average two-year fixed rates of 5.59 per cent, which is the highest since late June but remains below the recent April peak, when average rates hit 5.9 per cent.
New homes
A new Prime Minister and a significant cabinet reshuffle would have been an ideal opportunity to quietly drop the 1.5 million homes target. But instead, Angela Rayner, back in the housing seat, has reasserted the government’s commitment to the target—albeit it’s now firmly viewed as an ambition. That’s despite no English region delivering anywhere close to the housing need target. London, as we’ve discussed before, has the highest target and the widest gap in delivery.
On the face of it the Q2 figures from Molior London were more encouraging. The number of starts rose 31 per cent on Q1 2026 and were almost three times higher than Q2 last year. But this was off a record low base, with quarterly starts just 13 per cent of the figure needed to meet the all tenure housing target of 22,000 homes. Private sales in Q2 reached almost 2,800, up 8 per cent on the previous eight-quarter average. But fewer than a third of sales were to individuals, with domestic buyers accounting for fewer than 600 sales last quarter. More than 4,600 homes were complete but unsold, the highest Molior London has ever recorded, meaning continued caution around new development is expected in H2 unless we see a significant uptick in take up.
UK Living
Investment in the UK Living sector hit £6.5 billion in H1—a respectable showing that masked significant quarterly variation. Q1's momentum moderated as Q2 volumes dropped by half, signalling investor caution as the year progressed.
Build-to-rent emerged as the standout performer, posting its second strongest half-year performance on record. The sector's success hinged almost entirely on Morgan Stanley and Ridgeback’s £1 billion+ acquisition of Metra Living. Strip out this deal, and BTR's underlying activity tells a more measured story. The sector also witnessed a notable structural shift: multifamily assets now command 85 per cent of investment, last year it was broadly 50/50 multifamily to single. Perhaps most striking, forward investment has declined to record lows, suggesting developers are pulling back on speculative commitments whilst investors prefer seasoned, income-producing stock.
Student accommodation proved more volatile quarter-to-quarter. A strong Q1, buoyed by Unite’s purchase of Empiric Student Property, gave way to a considerably quieter second quarter— as transaction volumes fell to their lowest level in a decade.
Healthcare provided the steadiest hand, returning to normalised deal flow after a record Q4 2025. Transaction sizes have reverted to more typical levels, though the sector enters H2 with renewed optimism following Blue Owl's entry into the market—a signal that North American capital continues eyeing UK healthcare as demographic tailwinds strengthen.
Looking ahead, H2's trajectory depends on whether institutional buyers accelerate deployment or maintain Q2's more cautious stance.
Northern markets lead the pack
Rents rose 3.3 per cent in the 12 months to June, according to the latest figures from the ONS. Rental growth outpaced house prices, which rose 2.7 per cent in the latest monthly figures. Comparing government figures shows that only one month (April 2026) since the start of 2023 have house prices outperformed rents.
The strongest performing region for both rental and house price growth was the North East, with prices rising 5.9 per cent and rents 6.3 per cent in the latest monthly data. Zoopla data shows the North East was the only region that saw an increase in sales agreed in July, with 4 per cent more homes going under offer. Nationally volumes fell 9 per cent.
JLL’s Residential and Living team consists of over 300 professionals who provide a comprehensive end-to-end service across all residential property types, including social housing, private residential, build to rent, co-living, later living, healthcare and student housing.
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