Quarterly rise in rents accelerates, Rightmove and Mortgage rates edge down a day following better inflation data

Economic data

Rental market. Asking rents rose by 9.3% Y/Y to a new record of £1,231 per month in Q2, only slightly down on the 9.4% rate in the previous quarter (below, left), according to the latest Rightmove Rental Price Tracker. The Q/Q change accelerated to +3.4%, from +1.5% in Q1 and +0.9% in Q4 22. The two regions with the highest Y/Y increase were London (+13.7%), where the cost of the alternative sales market are highest, and Scotland (+13.8%), where there is a 3% pa rental cap on existing tenancies (but not new tenancies, which the Rightmove data tracks).

Mortgage lending. Wednesday’s bigger than expected fall in inflation was followed only a day later by small, but possibly significant reductions in interest levels in the two key fix-rate mortgage products. Moneyfacts

In other news …

Commercial property. Levelling-up Secretary Michael Gove has over-ruled Marks & Spencer’s plan to redevelop its flagship central London store, BBC. The retailer wants to replace the Art Deco building at Oxford Street with a 10-storey store and office block. Westminster Council and City Hall had previously approved the scheme before it was later recalled by the government. M&S has warned it may leave the Marble Arch site altogether. The retailer believed the current building was “failing” and had examined many alternatives, including retrofit, but that this was the only viable option. Environmental and heritage campaigners argued the 1929 building should instead be refurbished and restored.

Viewpoint: A vociferous and well-organised group of campaigners against the demolition are cock-a-hoop about the decision, claiming Gove’s decision marks a powerful new precedent in favour of retro-fitting buildings rather than replacing them. Gove has already had a swathe of housebuilding CEOs questioning what the Levelling-up Secretary ‘is on’ after pulling in a swathe of planning decisions (see my recent Property Week column, A new enthusiasm for Labour). This move – which goes against Westminster, London Mayor and the building listings process (it was turned down twice because, presumably, the building ain’t that special) – could have serious consequences in the wider property, construction and retail sectors. If M&S carries out its threat to move, it would signal continuing decline of the moribund Oxford Street. The problem for M&S is the building lacks flexibility in a rapidly changing retail landscape. For property and construction, the problem with the well-meaning but naïve ‘retro-first’ campaign is the cost of refurb is so harder to predict than newbuild. So greater contingencies have to be priced in, either bad for the client or others in the building chain. The only real economic beneficiaries will be construction lawyers. As for carbon savings, most refurbs of this type merely involve retaining facades and scooping out the bulk of buildings. Planning will become even more of a nightmare, leading to further deterioration of town centres. A completely politically-driven stunt by an ever-more capricious Gove, which rides roughshod over local democracy and economic sense, with negligible reduction in carbon.