1. The UK Property Market ‘Back to the Future’ Grenville Turner Group Chief Executive Countrywide plc

2. The UK Property Market – ‘Back to the Future’ Inflation is gathering pace, thanks to higher food and fuel bills According to the Nationwide the average property value is £10,077 Anne Ashworth The Times, 2 nd May 2008 House prices are sliding as a result of difficulty in obtaining mortgages Homebuyers are facing the consequences of the profligate behaviour of the banks whose executives have been focused primarily on their own pay- outs

3. The UK Property Market – ‘Back to the Future’ So why are we here again? Unprecedented competition amongst Lenders Insatiable demand for home ownership The ‘illusion’ of excess capital The growth of property advisors Reckless management of interest rates

4. What is different? Housing now part of the Global Economy Multiple ownership is now commonplace Mortgage finance is provided through increasingly sophisticated products The UK Property Market – ‘Back to the Future’

5. When the US sneezes, Europe catches a cold! Inventory of existing homes (months supply) Existing monthly home sales for 2007 & 2008 (m-o-m % change) US Residential Real Estate Market Trends – Continued Overhang

6. US Housing Market Long-term Fundamentals US housing market growth has been supported by strong US demographics and economic fundamentals Up-markets are greater in magnitude and longer in duration than down-markets (not your typical cyclical industry) The UK Property Market – ‘Back to the Future’ Number of existing home sale units (‘000s) Median existing home sale price (‘000s) Transaction volume ($ billions) Average home size (sq-ft) 1972-2007 CAGR = 6.2% 1972-2007 CAGR = 2.7% 1972-2007 CAGR = 9.0% Source: NAR Source: U.S. Census Bureau 1973-2006 increase of 809 sq-ft

7. U.S. Housing Market Long-term Fundamentals (con’t) Demographics  U.S. population has grown at a CAGR of 1.1% since 1975 (exceeded 300 million in 2006)  Combined with increased home ownership rates, demographics have contributed nearly 2% to housing demand  Transaction volumes have increased faster in higher price categories, resulting in increased commission dollars per transaction Trading up  It typically takes 2-3 years of sharp volume declines before prices actually fall at a regional level  Strong seller reluctance to allow prices to drop driven by high transaction costs, significant leverage, and large proportion of household wealth tied to real estate Inelastic pricing  Strong job and income growth, coupled with historically low interest rates, have made housing relatively affordable Affordability Population (millions) CAGR =110bps Home ownership rate (percentage) Change: +330bps Source: Economy.com; Freddie Mac

8. Lessons from the US All downturns over the past 25 years have had strong “bounce back” periods post-correction Existing single family home sales-value (% variation y-o-y) 80’s down cycle 90’s down cycle 00’s down cycle Current down cycle Source: NAR historical transaction volume based on average homesale price (forecasts are median price). Note: Cycles defined as 79—84; 88—93; 99—04; 05—10 1 Mortgage rate, unemployment rate and GDP refer to 5-year period (two years prior until three years after correction); current cycle refers to three year period (two years prior and one year after correction) Total rebound = 49% Total rebound = 29% Total rebound = 68% Average 30-year fixed mortgage rate 1 : 13.45% Average unemployment rate 1 : 7.3% Real GDP CAGR 1 : 0.9% Average 30-year fixed mortgage rate: 10.05% Average unemployment rate: 5.9% Real GDP CAGR: 2.3% Average 30-year fixed mortgage rate: 7.19% Average unemployment rate: 4.6% Real GDP CAGR: 2.6% Average 30-year fixed mortgage rate: 6.04% Average unemployment rate: 5.1% Real GDP CAGR: 3.3% NAR 2008- 2009 Forecast 2001 2002 2003 2004 2005 2006 2007 2008 2009

9. The UK Property Market – ‘Back to the Future’ So where do we go from here? Transaction levels House prices Availability of mortgage finance

10. We all needed the Wake-up Call! Lenders Builders Intermediaries Consumers Regulators The UK Property Market – ‘Back to the Future’

11. We all have to charge what our products and services are worth! Putting each other out of business will only lead to more misery! Risk : Reward pricing has always been sensible! Greater oversight is necessary! The UK Property Market – ‘Back to the Future’ Adapting to the New World – 2 Wrongs don’t make a Right!

12. Surviving the Crunch Don’t simply hope for the best, plan for a more sustained downturn Remove costs immediately, beyond where it hurts Everyone back to the front line, every pound of revenue matters Focus on the positive aspects of the market. We are not at the top of the last cycle, we are at the bottom of the next cycle! The UK Property Market – ‘Back to the Future’

13. The Future The housing market is leading us into recession and it will lead us out of recession Intermediaries will remain the dominant arrangers of mortgages House prices will continue their long term upward trend What doesn’t kill you will make you stronger The UK Property Market – ‘Back to the Future’