Another billionaire says goodbye

Chris Rokos, the billionaire investor and founder of the hedge fund Rokos Capital Management, is moving his tax residency from the UK to Greece. His firm, which manages about US$22 billion, will open an office in Athens.

The move is "the latest in a string of high-profile financiers and business leaders that have opted to leave after the abolition of [the UK's] long-standing non-dom regime and increased taxes on everything from private equity investments to inheritances and capital gains," Bloomberg writes.

Shadow Chancellor Andrew Griffith grilled Chancellor John Healey on the move yesterday, pointing out that Rokos paid an estimated £330 million in tax last year – equivalent to 38,000 average income taxpayers. Will this factor into the government's thinking in October? 

Sales of 30-year gilts drew a yield of 5.82 per cent yesterday, the highest for any bond sale since the Debt Management Office (DMO) was created nearly 30 years ago. Economists at the Resolution Foundation estimate the Chancellor's margin against his fiscal rules has shrunk to £5 billion.

Possible exceptions

The surge in bond yields has moved to the mortgage market. Barclays became the third major lender to raise rates yesterday, following similar moves by HSBC and NatWest since the beginning of the month.

Leading fixed rates sit at about 4.34%, according to Knight Frank Finance, while the average fixed rate has risen to 5.61%, Moneyfacts data shows. In a speech yesterday, Bank of England Governor Andrew Bailey said fixed rates had risen about 75 basis points since the conflict in the Middle East began. That, "with the possible exception of Japan," is the largest increase in the G7, he added. 

UK house prices fell in August for the first time since 2023, Lloyds Bank reported on Monday. Values dipped 0.2% during the month, following a similar decline in July. Really, the market is trading sideways – Nationwide's index posted a 0.2% gain. Leading indicators published in recent weeks had been fairly positive. Zoopla data showed searches for homes were 7% higher than a year ago in August, their strongest annual increase for 12 months, and buyer enquiries are recovering from a low base. That was before the latest rise in mortgage rates, which will keep a lid on activity as we move through what is typically a busier autumn selling season.

Noticeably stronger

The number of transactions in prime central (PCL) and prime outer London (POL) in the three months to August was 2% higher than the five-year average, Knight Frank data shows. There is a clear divergence in performance between the two, however. The more domestic and needs-driven market of POL performed better. Transactions were 10% higher than the five-year average compared to a drop of 8% in PCL. 

As we've discussed, concerns among buyers in higher-value markets like central London include the scrapping of the non dom tax regime, an increase in the second-home stamp duty surcharge and the possibility of future wealth taxes. That said, activity in PCL is noticeably stronger than last year, said Stuart Bailey, head of prime central London sales at Knight Frank.

“The key difference this year is that buyers are using pre-Budget speculation and bond market jitters to negotiate the price down rather than walk away from the deal completely,” he says. “The underlying confidence among buyers is there and parts of PCL are extremely good value.”

Renters rights

Stock levels in London's prime rental markets have tightened as a series of tax and legislative changes in recent years have undermined the viability of letting property for landlords.

The number of new listings in prime central (PCL) and prime outer London was 10% lower than the five-year average in the three months to August, Rightmove data shows. In fact, new listings haven’t risen above their five-year average since April 2021.

The Renters Rights Act, which came into effect in May, sets stricter rules around collecting and increasing rent, reforms the possession process and introduces safeguards to prevent properties being re-let after they have been recovered for sale, as we explore here. As a result, new lettings activity is also down. The number of tenancies agreed in London in the three months to August was 8% lower than last year, which exactly matched the fall in new supply over the same period.

While average rents increased by 3% in POL in the year to August, there was a smaller increase of 1.2% in PCL. Meanwhile, there were 8.7 new prospective tenants for every new listing in POL in August, which was the highest figure in five years. That compared to a ratio of 5.2 in PCL.

Faster contractions

UK construction output fell again in August, led by weakness in housebuilding. The S&P Global UK Construction Purchasing Managers’ Index registered 44.3 in August, down from 44.7 in July and below the neutral 50.0 value for the twentieth successive month.

All three sub-sectors – housing, commercial and civil engineering – recorded a reduction in activity during the month, but housing was the only category to register a faster pace of contraction than in July.

"Sluggish demand conditions and low client confidence, combined with anxiety about the impact of the Middle East conflict, were again factors contributing to lower workloads across the construction sector," says Tim Moore, Economics Director at S&P Global Market Intelligence. "Business optimism was still subdued, as growth projections for the year ahead eased since July and were much weaker than historic trends. Concerns about geopolitical tensions, lacklustre domestic economic prospects and elevated borrowing costs were all noted as holding back confidence." 

In other news...

Short-term letting demand in Switzerland surged following the first military strikes in the Middle East. The FT speaks to Knight Frank's Alex Koch de Gooreynd about why families are seeking a foothold in Geneva, Zurich and beyond.