Brexit! What next? CHC One Big Conference. Helen Collins, Director, Savills Housing Consultancy. 6 th October savills.com

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1 Brexit! What next? CHC One Big Conference Helen Collins, Director, Savills Housing Consultancy 6 th October 2016 savills.com

2 Uncertainty & unknowns There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know.

3 Don t forget the market moves Late cycle price growth stretches affordability Late cycle price growth stretches affordability Short lived bounce Market stagnation Strong growth as economic recovery gathers pace Slowdown post implementatio n of MMR

4 The Great Recession slowest recovery on record Prolongued low/negative growth Rising unemployment Primary cause credit crunch - fall in bank lending, shortage of liquidity High energy costs Fiscal austerity Falling consumer and business confidence Falling house prices and transaction volumes

5 Transaction volumes 2,000,000 1,800,000 1,600,000 Rolling annual number of UK residential transactions 1,400,000 1,200,000 1,000, , , , ,000 0

6 House prices Source: HM Land Registry 15% 10% 5% 0% -5% -10% -15% -20% -25% Mar-06 Sep-06 Mar-07 Average UK house price distance from 2007/8 peak Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16

7 Private sector volumes supported by affordable housing Source: Savills using DCLG data Unsupported market sale Implied affordable delivered by private sector Local authorities Supported sales (Help to Buy and New Buy) Housing associations Number of new homes completed (England) 200, , , , ,000 75,000 50,000 25, Year to March

8 Housebuilder margin discipline maintained Source: Thomson Reuters Operating margin net of exceptional items, % Barratt Bovis Redrow Taylor Wimpey Persimmon Crest Nicholson Bellway Berkeley Average

9 Active developers and output Source: NHBC 250,000 New home registrations, GB 7,000 New home registrations Active builders 6,000 5,000 4,000 3,000 2,000 1, , , ,000 50,000 0 Number of builders on NHBC register delivering 1 or more units

10 2008 Housing Stimulus Programme Mortgage rescue Kickstart LA Building programme Conversion Shared Ownership to Rent

11 What s different? Better capitalised banks Capitalised builders Low interest rates Cheap high LTV mortgages Help to Buy Wales

12 There are small pockets where property values are over 300,000, but the majority of property is sold at under 200,00 Source: ONS, Land Registry

13 Depth of Market - Wales 3500 New houses New flats Old houses Old flats ,000 90, , , , , , , , , , , , , , ,000 1,250,000 1,600,000 1,900,000 5,000,000 Number of Sales Residential value (top of band) Source: Land Registry New Build Second Hand 2,864 40,315

14 Depth of Market North West Source: Land Registry New Build Second Hand 7,119 98,940 50,000 90, , , , , , , , , , , , , , ,000 Number of Sales 1,250,000 1,600,000 1,900,000 5,000,000 New houses New flats Old houses Old flats Residential value (top of band)

15 Depth of Market - England New houses New flats Old houses Old flats Source: Land Registry New Build Second Hand 72, ,709 50,000 90, , , , , , , , , , , , , , ,000 1,250,000 1,600,000 1,900,000 5,000,000 Number of Sales Residential value (top of band)

16 Wales has recovered to it pre-crunch peak in terms of transactions and has seen a slower recovery in terms of prices, still below their pre-crunch peak 160% 150% London 140% Price vs peak 130% 120% 110% 100% 90% Yorkshire and the Humber England & Wales North West West Midlands South East East of England South West Wales East Midlands North East 80% 50% 55% 60% 65% 70% 75% 80% 85% Transactions vs pre-crunch average Source: Savills using Land Registry

17 Annual transactions in Wales 80,000 Wales 70,000 60,000 50,000 40,000 30,000 20, Annual transactions Source: CML 1,600,000 1,400,000 1,200,000 1,000, , , ,000 England Annual Transactions

18 Wales is more affordability constrained than the North West Median house price to median earnings ratio Wales North West London England Source: DCLG

19 Values in Wales are consistently below peak, with the exception of Cardiff, but most authorities saw modest growth in values between 2014 and % 10% 5% 0% -5% -10% -15% -20% Carmarthenshire Blaenau Gwent Ceredigion Neath Port Talbot Pembrokeshire Newport Swansea Gwynedd Merthyr Tydfil Rhondda, Cyon Taff Wrexham Conwy Denbighshire Torfaen Powys Caerphilly Flintshire The Vale of Glamorgan Bridgend Isle of Anglesey Monmouthshire Cardiff Distance from peak Change 2014 to 2015 % change Source: Savills using Land Registry

20 What happens next? Buyer sentiment Transactions Mortgage lending Interest rates House prices Supply

21 The prepared board... House prices falls Sales volumes shrink Labour shortages Cost of raw materials Contractor failure Gilt rates keep dropping OR UK sovereign rating drops further & funding costs rise The return of inflation Pensions deficits grow again Commercial subsidiaries fail Possible impairment: landbanks, s/own Cashflow dented

22 Thank you Helen Collins Tel: