Hi there,

This is Chubby Wallet. The newsletter that teaches you how to profit from property trends before they go mainstream..

Here's what’s in store..

• Buy to let sector still thriving

• London now the weakest UK housing market

• Auction market off to a strong start

LATEST DEVELOPMENTS

BTL UPDATE

Buy to let sector in good shape

Despite years of tax changes and higher interest rates, the buy-to-let sector ended 2025 in stronger shape than many expected. Arrears fell sharply in Q4, and landlord mortgage performance is currently stronger than that of owner-occupiers. The predicted wave of landlord distress has not materialised.

The details:

• UK Finance data shows that 9,520 buy-to-let mortgages were in arrears of 2.5% or more of the outstanding balance in Q4 2025. That represents a 9% decline from the previous quarter, a steeper improvement than in the homeowner market.

• Early-stage arrears, defined as 2.5% to 5% of balance outstanding, fell by 7% to 3,480 accounts. This is a key forward-looking category, and it is contracting rather than expanding.

• Overall, mortgages in arrears account for just 0.50% of all outstanding buy-to-let loans. That is roughly half the arrears rate seen among owner-occupiers.

• Possessions in the sector also declined. Only 770 buy-to-let properties were taken into possession in Q4, down 14% from the previous quarter.

• These figures come after sustained regulatory and fiscal pressure on landlords, including mortgage interest relief restrictions and a higher interest-rate environment.

Why It Matters

Three forces appear to be supporting stability. Wage growth, improved refinancing conditions and forbearance on the part of lenders.

The decline in early-stage arrears is particularly important. If that category were expanding, it would signal future stress building in the system. Instead, it is contracting, implying that the adjustment phase to higher interest rates may be largely complete.

SALES AND STOCK LEVELS

Prices are falling in London

London is now the weakest major housing market in the UK. Prices are falling year-on-year, prime areas are under heavy pressure, and flats are significantly underperforming houses. At the same time, asking prices are edging up, creating a widening gap between seller expectations and achieved sale values

The details

• ONS data shows that London was the only UK region to record an annual house price decline in November 2025, with prices down 12.5% year-on-year to an average of £553,000. This marked the fourth consecutive month of annual falls.

• Prime Central London has been hit hardest. In Kensington and Chelsea, prices fell by 16.3% year-on-year. Weaker overseas demand, following changes to non-domicile tax rules, has reduced activity at the top end of the market.

• There is also a sharp divide between property types. Flats are driving much of the weakness. Around 22.2% of flat sellers are selling at a loss, compared with just 3.5% of house sellers. That means flat owners are more than six times as likely to crystallise a loss.

• Despite this, asking prices remain relatively firm. Rightmove data shows that average asking prices in London rose by 0.9% in January. This creates a clear disconnect between advertised prices and completed transactions.

Why It Matters

The London market is fragmenting. Prime areas are adjusting to lower international demand, while the flat market faces structural challenges including leasehold concerns, service charges and legacy cladding issues.

The growing gap between asking prices and achieved sale prices suggests a market still in the process of repricing. Sellers appear slower to adjust than buyers, particularly in segments already under pressure.

With a high proportion of flat owners selling at a loss, the data points to continued vulnerability in that segment. London is no longer moving in line with the rest of the UK, it is undergoing its own correction, driven by tax changes, affordability constraints and shifting demand patterns

AUCTIONS UPDATE

PROPERTY AUCTIONS

Strong start to the auction market in Jan

The UK property auction market opened 2026 with strong momentum. Supply rose sharply, buyer demand kept pace, and total capital raised increased significantly year-on-year. Residential stock drove most of the growth, while commercial activity increased but with more cautious bidding

The Details:

• In January 2026, 2,162 lots were offered nationally, up 47.3% compared with the same month a year earlier. Of those, 1,462 sold - a 53.1% increase. The success rate improved to 67.6%, up 3.8 percentage points year-on-year. Total funds raised reached £269.7 million, representing a 56.7% rise.

• The strength was not limited to a single month. Over the three-month period from November 2025 to January 2026, 9,179 lots were offered (+21.2%) and 6,350 sold (+23.6%), with a 69.2% success rate and £1.33 billion raised (+27.2%).

• Residential auctions were the primary engine of growth. In January alone, 1,965 residential lots were offered (+45.7%), with 1,356 sold (+54.4%).

• Commercial activity also expanded in volume terms. Lots offered rose 65.5% to 197, and 106 sold (+37.7%). However, the commercial success rate fell to 53.8%

• Regionally, London led in value growth over the November to January period, with total funds raised rising 64.4% to £350.2 million, largely driven by residential sales, which increased 75.3% in value to £313.9 million.

• The North-East saw total raised increase 43.4% to £38.2 million, with commercial values more than doubling. Northern Ireland posted strong percentage growth from a lower base. Some regions, including the East Midlands and Yorkshire and The Humber, showed mixed patterns, with residential strength offsetting softer commercial performance

Why it matters

The auction market is functioning as an active price-discovery mechanism in a high-supply environment. Rising lot numbers combined with improving success rates indicate that increased supply is being absorbed rather than rejected.

Residential assets are attracting consistent demand, suggesting buyers remain willing to transact where pricing is transparent and execution is fast. Commercial stock is moving, but with greater selectivity, reflecting income sensitivity and sector differentiation.

The data points to a market entering 2026 with liquidity intact and transaction momentum sustained, particularly in residential segments where pricing clarity and speed of sale are valued.

That's it for this week folks. Each week we'll cover strategies, updates and insights to help you succeed in real estate. We love this stuff!

If you Have questions or just want to chat, We want to hear it.

See you next time in your inbox!

What did you think of this Newsletter?

🤜🤛 Loving Chubby Wallet? Make our day and forward this to a friend.