1. Presentation namewww.hamptons.co.uk Full steam ahead? Fionnuala Earley Residential Research Director, Hamptons International

2. Presentation namewww.hamptons.co.uk The economic and housing market context Pent up demand The impact of regulation Summary and questions

3. Presentation namewww.hamptons.co.uk The Economy The Good News –IMF expects UK to have fastest growth in G7 –Employment growing –Real wage growth positive – after five years –Inflation back on target –Interest rates expected to stay low till 2015 The Not So Good News –High household debt –More austerity cuts to come –Election......

4. Presentation namewww.hamptons.co.uk Housing market recovery began 12 months ago 4 Prices up 6.2% year on year in UK Price growth led by London – up 14.2% Transactions up by 18% in 2013 Transactions at 64% of 2007 peak Average House Price

5. Presentation namewww.hamptons.co.uk Price growth led by London and South East Strongest recovery in London and the South East Outside London and the South East higher value markets have recovered more quickly Some inner London Boroughs 50% above previous peak Feb 2013 house price compared to 2007 peak

6. Presentation namewww.hamptons.co.uk Average house worth 94% of 2007 value

7. Presentation namewww.hamptons.co.uk Growth in transactions led by top of the market 7 Recovery in transactions strongest in the higher price bands – not just driven by London Below £250k flat Recovery of domestic markets over 2014 should see growth of transactions in lower price bands pick up

8. Presentation namewww.hamptons.co.uk A recovery led by mortgage finance? 8 UK Mortgage lending (£bn) Mortgage lending up 18% year on year in value terms. Still 50% below 2007 levels Lending to first time buyers doubled between 2008 and 2013 in percentage terms

9. Presentation namewww.hamptons.co.uk Change (2007-2013) Yorks & Humber East Midlands East London South East South West West Midlands North West WalesScotland Cash buyers now account for around 1 in 3 transactions, while at the peak of the market in 2007 just 1 in 5 sales was to a cash buyer Housing markets in London and the South East are have seen an influx of cash buyers despite these regions traditionally relying more heavily on mortgage finance Or a recovery led by cash buyers?

10. Presentation namewww.hamptons.co.uk Change (Feb ‘13 – Feb ‘14) in stock Yorks & Humber East Midlands East London South East South West West Midlands North West Wales Scotland North East Number of properties for sale in London down 20%+ year on year Increased mortgage lending to cash and first time buyers means there are more buyers without property to sell Average time to sell fell by 2 weeks in 2013 – down to 8.3 Mismatch between supply and demand

11. Presentation namewww.hamptons.co.uk Sustainable or blowing bubbles? 11 Average monthly mortgage repayments (2014 prices) Homeowners are benefitting from low interest rates. For those buyers with a 10% deposit average mortgage repayments are at 2002 levels (adjusted for inflation). For existing owners housing is at its most affordable level for 10 years

12. Presentation namewww.hamptons.co.uk Pent up Demand Based on 2008 household projections c 350,000 pent up households Number of 20 to 34-year-olds living with their parents increased by 25 per cent since 1996 Concealed households up by 70% in 10 years More in London and the South Migration of households from North to South

13. Presentation namewww.hamptons.co.uk Help to Buy First time buyers accounted for nine out of 10 H2B buyers. H2B more successful in areas with lowest house price growth 16,465 properties purchased with H2B in first 11 months <1% between £500k and £600k Boost to overall market confidence

14. Presentation namewww.hamptons.co.uk Risks Even with rates at +5% payments lower than in 2007 in real terms But essential spending is higher too squeezing real disposable income Expectations – pick up in Buy to Let advances Elections add uncertainty

15. Presentation namewww.hamptons.co.uk Three pronged attack of the TLAs MMR – stricter affordability tests to be documented PRA – tighter capital requirements if sign of risk to financial stability FPC – stress test powers on interest rates And the Chancellor

16. Presentation namewww.hamptons.co.uk

17. Presentation namewww.hamptons.co.uk Thank You and Questions