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Welcome…….. Myth or Reality ?

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Presentation on theme: "Welcome…….. Myth or Reality ?"— Presentation transcript:

1 Welcome…….. Myth or Reality ? Is the property market really in recovery and, if so, what is it going to look like ?

2 Your starter for ten…….. Steve Mallen Robert Peto Clive Bush
Principal, Steve Mallen Consulting Catz, 1984, Geography Robert Peto Chairman, DTZ Investment Management Corpus, 1968, Economics/Land Economy Clive Bush Co-Founder, Exemplar Properties Johns, 1987, Economics/Land Economy Michael Brodtman Head of Valuation & Advisory, CBRE Magdalene, 1978, Economics/Land Economy Mike Bryant Head of Asset Management (Europe), GE Capital Real Estate Queens, 1985, Geography/Land Economy

3 Agenda……...

4

5 2013………From this……

6 ……to this……Things are looking up…

7 Time to Brainstorm……. Steve Mallen

8 Real UK GDP (1980 – 2017) Steve Mallen %
30 yr Average ( ) = 2.19% Forecast % Recovery Resumes Source: HM Treasury Steve Mallen

9 Source: Bank of England
Quarterly UK GDP (2007 to 2013) % Source: Bank of England Steve Mallen

10 Profile of UK Recession & Recovery
GDP Change from Peak Economy is still smaller than it was Source: NIESR Steve Mallen

11 UK Construction Sector GDP (2006 – 2013)
% Source: ONS Steve Mallen

12 Construction Sector Confidence (2004-2013)

13 Economic Growth Components (Q1 2011 to Q3 2013)
% Source: ONS Steve Mallen

14 Euro-Zone GDP (1999 to 2013) % Source: Capital Economics

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16

17 UK Commercial Property – Capital Growth (1971 to 2012)
% Source: IPD

18 UK Commercial Property – Capital Growth
(June 2009 – October 2013) % Source: IPD

19 UK Commercial Total Return Forecasts
% Source: IPF Steve Mallen

20 UK Property & Gilt Yield Spread (2001 to 2016)
% Source: IPD, Datastream, Henderson Global Investors

21 Euro-Zone Property & Gilt Yield Spread (1996 to 2016)
% Source: Capital Economics

22 Cambridge – Office Availability (2008 – 2013)
Grade A Grade B/C Steve Mallen

23 UK Gross Mortgage Lending
£ billion Source: CML

24 Planning for Growth………

25 New Private Housing Construction Output (2000 – 2013)
£ million Q Q2 2013 Source: ONS

26 Net Additional Dwellings: England (2000/1 to 2012/13)
Current Annual Need Source: DCLG Steve Mallen

27 Market Trends 2013 Robert Peto MA FRICS – Chairman, DTZ Investment Management 21 November 2013 PRIVATE & CONFIDENTIAL

28 Key Trends & Issues TRENDS Improving Economic environment
Weight of money – Yield Advantage, Safe Haven, Pension Auto enrolment. Secondary Property Yield Compression Loosening of debt scarcity London v. Regions Government Policy support for demand side on Residential ISSUES Interest Rates – purchase yields and “trailing yields” – Fair Value Inflation/deflation The wrong type of inflation – Excessive real Wage Growth Economic Fragility and impact on Occupier Demand “Events, Dear Boy, Events!” Property Supply Side – Capacity and Pricing OUTCOME ?

29 Impact of Rising Yields on Fair Values

30 Downward trend in Inflation
Inflation – 3 month annualised Source: ONS, DTZ IM, BOE

31 Is Deflation a possibility?
Monthly change in inflation Source: ONS, BOE

32 % Household debt as a % of income
Consumer balance sheets are still weighed down by high levels of household debt, meaning any interest rate hikes will have a big impact on households ability to spend Consumer Sector: Household debt % Household debt as a % of income % of mortgage debt that would be unaffordable with a rise in interest rates The NMG Consulting survey asks households how much of their monthly income is left after tax, national insurance, housing costs (eg rent, mortgage repayments, council tax), loan repayments (eg personal loans, credit cards) and bills (eg electricity). The chart estimates the percentage of mortgage debt held by mortgagors for whom this available income would be zero or negative after making higher interest payments on their secured and unsecured debt. The calculations do not account for the effect of fixed rates of interest on some loans. If in fact there is a rise in interest rates which could potentially happen along Source: PMA, ONS, BOE

33 GDP growth of 0. 8% represented the strongest growth rate in 3 years
GDP growth of 0.8% represented the strongest growth rate in 3 years. There are concerns that the UK economy still remains heavily reliant on the consumer and housing market. Output indices Q1 2008=100: Source: FT

34 Services output fell by c
Services output fell by c.4% in the UK in 2009 and has now recovered to pre-crisis levels in London and the South East. UK Services Output Forecast Source: Oxford Economics, DTZ IM

35 New supply pipelines across all sectors of the UK property market remain subdued, promising improving supply and demand fundamentals Office Pipeline Retail Pipeline New office supply as a % of total stock Town Centre Retail completions (millions sq ft) Source: DTZ Research Source: PMA Industrial pipeline Town Centre & Shopping Centre completions (millions sq ft) Industrial completions (millions sq ft) Source: PMA Source: PMA

36 UK Construction output – Private & Public
Brownomics: “Building Britain’s Future” Housing investment to treble to £2.1bn Coalition Government Austerity & Double-dip Source: ONS Help to Buy & Government guarantee & improving economy

37 Construction employment in the UK has fallen by 13% since 2008
UK Construction employment 2008 = 100 Forecast 2.3m 2m Source: Oxford Economics, DTZ IM

38 Property Yields v. Gilts, Swaps & Dividends
Where next?

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40 CLIVE BUSH Exemplar Properties
Cambridge university land SOCIETY CLIVE BUSH Exemplar Properties

41 Central London Development Outlook
Cambridge university land SOCIETY Central London Development Outlook Prime London Residential vs Offices Construction Market

42 Livex Fine Wine 100 Cambridge university land SOCIETY
Source: Liv-ex Fine Wine 100 Component wines and vintages

43 Central London Residential and Office Capital Values
Cambridge university land SOCIETY Central London Residential and Office Capital Values Source - CBRE

44 Capital Value Differentials – Residential vs Office (£ per sq ft)
Cambridge university land SOCIETY Capital Value Differentials – Residential vs Office (£ per sq ft) Source - CBRE

45 Cambridge university land SOCIETY Construction Risk

46 London Construction Prices
Cambridge university land SOCIETY London Construction Prices Source – EC Harris

47 CULS MARKET TRENDS SEMINAR
Michael Brodtman Head of Valuation & Advisory Thursday 21st November 2013

48 UK All Property Rental and Capital Value Growth
CBRE Monthly Index rebased to Dec - 99 Index 13/09/2013 Source: CBRE Monthly Index

49 UK AVERAGE PRIME YIELDS
% 13/09/2013 Source: CBRE Prime Rent and Yield Index

50 UK Prime vs Secondary All Property Yield
Excluding Central London Spread (%) Yield (%) 13/09/2013 Source: CBRE

51 CBRE Monthly Index Capital Values Changes
From turning point (Jun – 09) to Sep -13 % Source:: CBRE Monthly Index

52 CBRE Investment in the UK
By investor type £ Million Source: CBRE/Property Data

53 LONDON INVESTMENT MARKET BOOMING
56.2% of total invested in 2013 Source: CBRE/Property Data

54 NET FLOWS TO PROPERTY UNIT TRUST/OEIC
% £ m Source: IMA/IPD Monthly Index

55 TRANSACTION VOLUMES: YTD 2013 YIELD PROFILE
28% Source: CBRE/Property Data

56 UK BANK LENDING TO PROPERTY COMPANIES
£ bn Source: Macrobond

57 GROWING APPETITE FOR ALTERNATIVES
£1.65b of student accommodation deals Residential & commercial ground rent portfolios Pubs, Leisure, Healthcare 6 active annuity funds

58 keY THEMES OF 2013 / 14 Occupier markets stabilising in improving economy Positive fund allocations and improving debt market 30% improvement in investment volumes leading to lower yields Growing interest in alternatives Strong momentum for 2014

59 Mike Bryant GE Capital Real Estate
November 2012

60 GE Capital Real Estate Global Picture - $40bn Assets
- GE shareholder monies European Picture - $11bn - 50/50 Debt/Equity - Present in all major markets Strategy - Structured sale programme of equity…… - …when supported by asset & market story - Grow debt book

61 Key Themes Economies - UK vs Eurozone Organisational
- Regulation changing how we operate Equity Book - Occupational Markets …….. still favour the Tenant - Investment Markets…………….increasing risk appetite Debt Book - Strong competition for core deals – reduced spreads - Need to differentiate offer to succeed

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64 Questions……...?


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