Property trends seminar economic & property market Overview Steve mallen march 28th 2017

contents Economic Issues Property Market Trends Observations

Economic Issues

The times they are a changing…….

……..and policy is shifting…….

Uk Quarterly GDP (1955 to 2016) % The economy is much less volatile than it was….even if it doesn’t always feel like it…. Source: ONS

Uk GDP Per Quarter (2011 to 2016) % Eurozone currency & debt crisis Brexit Fears Unsettle Markets Source: ONS

UK GDp Forecasts % A return to optimism ? Source: Bank of England

Euro Sterling exchange rate Euro declines as EU economies struggle Euro surges in the wake of Brexit Source: European Central Bank

Energy & food prices driving up inflation into “explanation” territory Inflation (CPI) % Energy & food prices driving up inflation into “explanation” territory Prices are now rising faster than earnings…… Source: ONS

ECONOMIC PRODUCTIVITY GVA Growth (Year to Q3 2016) Top Ten UK Cities Projected GVA Growth (2017) Top Ten UK Cities Source: CEBR/Irwin Mitchell The Bidwells region and the Golden Triangle contain many of the UK’s most productive centres

Property market trends

Commercial property total returns % Forecast Brexit undermines market confidence……but performance expected to improve gradually Source: IPD/MSCI/IPF

UK commercial property risk & return UK property has offered progressively higher risk adjusted returns against a backdrop of lower volatility and less risk Source: IPD/MSCI/IPF The Sharpe Ratio = The average return earned in excess of the risk-free rate per unit of volatility or total risk. The Higher the ratio, the better the risk-adjusted return. Standard Deviation = The degree of variance in performance over time as a proxy for market volatility. The lower the deviation, the less volatile and hence less risky the market.

UK Investment funds – Net retail sales Investment fund market completely “spooked” by Brexit, but has recovered…. Source: Investment Managers Association

Net retail sales of uk domiciled property funds £ millions Market uncertain and confused Brexit prompts a stampede for the doors in UK property funds Source: Investment Managers Association

UK Farmland prices (£/Acre) 50 year Bull-run on UK farmland prices stalls with Brexit fears Source: Financial Times

UK Housing Transactions Housing market impacted by a tax reform and Brexit rollercoaster with transaction volumes subsequently stabilising at historically low levels Source: Land Registry/ONS

The housing market challenge Residential planning approvals have risen sharply in response to planning reform and positive pricing And yet housing completions remain stubbornly low, supporting gravity-defying price and affordability ratios

Uk Construction Index Construction sector confidence and activity plummets around Brexit but has recovered to a marginally positive position Growth Contraction Source: Markit/CIPS UK Construction PMI

Digital & technology gva (2016) £30bn In 2016, the UK secured £6.8bn in venture and private equity investment – 50% more than any other European nation £5.5bn Digital and technology output is rising at 10% pa and exceeded £100bn in 2016. There are now 1.7 million people employed in this sector and 70% of the growth is taking place outside London Source: Tech City £million Client name - Document title

observations

Holding our breath…….

Observations Change has created confusion, uncertainty and division BUT The economy remains in good shape with forecasts improving Although inflation and exchange rate pressures will temper growth Property market confidence has stalled but is recovering Investment fundamentals remain positive in all sectors Construction sector has headwinds and tailwinds Post-Brexit growth will focus on key east and south UK centres Golden Triangle prospects are especially strong And Brexit will take many years to resolve…… ………and you can’t hold your breath forever !