The Housing Market of Tomorrow: An Expert View

Transcription

1 The Housing Market of Tomorrow: An Expert View Robert Grundy, Head of Housing, Savills Friday 11 th July 2014, Walton Hall, Warwickshire savills.com

2 What I will cover... Housing Market: Prices and Rents What will the next government be dealing with? What does the future hold for Housing Associations? Housing the New Excluded: Bridging the Gap in Housing

3 Housing Market: Prices and Rents What will the next government be dealing with? What does the future hold for Housing Associations? Housing the New Excluded: Bridging the Gap in Housing

4 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Annual House Price Growth House Price Growth Nationwide +11.1% 15.0% 10.0% Land Registry Halifax Nationwide 5.0% Halifax +8.7% 0.0% -5.0% -10.0% Land Registry +6.7% -15.0% -20.0%

5 Since June 05 Past 12 months Regional price growth variation since June % Since June 05 (LHS) Past year (RHS) 18% 50% 15% 40% 12% 30% 9% 20% 6% 10% 3% 0% 0% -10% -3% -20% -6% Source: HM Land Registry

6 Since June 05 Past 12 months Regional price growth variation & with past 12 mths 60% Since June 05 (LHS) Past year (RHS) 18% 50% 15% 40% 12% 30% 9% 20% 6% 10% 3% 0% 0% -10% -3% -20% -6% Source: HM Land Registry

7 Spread of the recovery April 2014 vs 2007/8 Peak 2014 April annual change

8 Mainstream Residential Five Year Forecasts

9 Regional Forecasts Source: Savills Research

10 Midlands: closer look - house price heat map Source: HM Land Registry

11 Since 07/08 peak Past 12 months Midlands price growth vs. Peak. Prices in Mids still below peak. Bubble? Wot bubble? 15% 10% Off peak (LHS) Past year (RHS) 9% 6% 5% 3% 0% 0% -5% -3% -10% -6% -15% -9% -20% -12% -25% -15% Source: HM Land Registry

12 Since 07/08 peak Past 12 months Midlands price growth vs. Peak. Picking up at different rates past year. 15% 10% Off peak (LHS) Past year (RHS) 9% 6% 5% 3% 0% 0% -5% -3% -10% -6% -15% -9% -20% -12% -25% -15% Source: HM Land Registry

13 Index, 2006/07 peak = 100 Residential Starts: Higher development activity across the country. London first, others following London South Midlan ds North Scotlan d Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q Source: DCLG & Scottish Govt residential starts, rolling four quarter total, all tenures.

14 Mar 07 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 % considering factor a major constraint Biggest constraints on dev t: Planning, Land Supply and Land Prices. Now joined by Labour and Materials Planning delays Labour availability Materials availability Land availability Land prices Source: HBF

15 Effect of Help to Buy 1 on new build completions. Bigger impact in lower value markets of Mids & North HTB Equity Loans % of build completions 35% 30% 25% 20% 15% 10% 5% 0% Source: DCLG (year to March 2014)

16 Help to Buy 1 in the West Midlands: follows New Build, Coventry, Telford & Cannock Chase

17 Annual rental growth, % Rents: Rental Growth IPD South Eastern South West, Midlands & Wales Northern England & Scotland Source: IPD Residential Investment Digest

18 Savills Rental Forecasts Source: Savills Research

19 Rental Values. Overview: East & West Midlands. North vs South. Significant variation. Source: Rightmove

20 Rental Values Close Up Birmingham 1 bed. Highest rents: New Build, City Centre regen, leafy suburbs. Source: Rightmove

21 Rental values Birmingham 2 bed Source: Rightmove

22 Rental values Birmingham 3 bed Source: Rightmove

23 Rental values: Leicester 2 bed Source: Rightmove

24 Rental values: Nottingham 2 bed Source: Rightmove

25 Housing Market: Prices and Rents What will the next government be dealing with? What does the future hold for Housing Associations? Housing the New Excluded: Bridging the Gap in Housing

26 New housing units p.a. Supply gap over and above private sector construction filled with market rent & affordable housing? 240, , , , , , , ,000 80,000 60,000 40,000 20,000 0 Private Enterprise Local Authorities Housing Associations Demand Projections Savills Forecast? Source: Savills

27 Additional households/homes in England (000s per annum) Increasing supply but more land and development needed 250 Housing Land plots with planning consent 100 New homes starts 50 0 Source: DCLG, Glenigan for HBF, CCHPR for TCPA

28 Housebuilders Continue traditional model Quite happy at k units pa Very consistent Profitability Property cycles Small builders? Scars left by credit crunch? Rebuild capacity?

29 Sales per outlet per annum Absorption rates: Housebuilders are selling faster into stronger markets and consuming stocks of land (to date) Crest Nicholson Redrow Barratt Taylor Wimpey Bovis CALA Galliford Try Miller Source: Housebuilder annual reports (or latest interim statement)

30 If you want subsidised housing... You need a subsidy.

31 Government plans to deliver 165,000 affordable homes between 2015 and 2018 Affordable Homes Programme - HCA Funding for new homes at 80% market rents. Up to 2015 allocated. 1.7bn To hopefully fund 165,000 new homes 75% of grant if on site pre March 2015 Affordable Homes Guarantee Programme - HCA Government debt guarantee to bring down the cost of borrowing for new homes. Approximately 220m has so far been allocated out of a 350m fund to be spent by But Starts down by 5,650 in 2014 Enthusiasm of HA players? Level of grant? Regulatory burden? Affordable Rents = more risky than Target Rents?

32 Proportion of dwelling stock in England (%) UK Housing Tenure More Market Renting? More intermediate tenures? Social housing stagnant Home ownership in decline In-betweeners Market renting expected to increase Policy flexibility Opportunity for social landlords and institutions Quality product 80% 70% 60% 50% 40% 30% 20% 10% Home ownership Social housing Opportunity? 0% Source: Savills, CLG, Survey of English Housing

33 Market Rent and other uses can help absorption rates on large sites in a strong market Housing Absorption (average dwellings per annum during development period) Conventiona l Diversified routes to market Open Market Housing Build to Rent 75 Custom Build 50 Affordable Housing Elderly/Sheltered Housing 50 Student Housing 75 Total Source: Savills

34 HA s Actively reviewing their future

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36 NHF: Associations will house one in five by 2033 HA s will house one in every five people within 20 years Up from one in ten One market rent or sale for every two affordable homes built 80,000 affordable homes housing associations will build per year (120,000 overall) NHF sees turnover increase fivefold from 14 billion in 2012 to more than 70 billion by 2033

37 The Housing Association world is changing HA s moving into private renting and build for sale Internal cross subsidy Becoming providers across all tenures JV s/ investment partnerships Looking at assets (honest) Bogged down in low value areas Privately Owned HA s - For Profit RP s 2013: 25 registered; 10 in pipeline, some substantial Range of innovative forms of Affordable

38 HA s & Market Rented L&Q. Places for People Genesis Nottinghill Fizzy Living/ Thames Valley Catalyst Orbit

39 Build for sale Pro s: Margin Recycles cash Cross subsidy Cons Risk Market timing Motives & culture

40 Build for sale

41 Local Authorities - resurgent Back to the Future? 1950 s just what council housing was Market rental for skilled workers Some will return to market rent Re working run down council estates Powerful drivers of urban regeneration Mixed developments Many ways around the debt cap Cheap PWLB debt via General Fund Local Authority pension funds Partnerships/ JV s/ financing techniques

42 Housing Market: Prices and Rents What will the next government be dealing with? What does the future hold for Housing Associations? Housing the New Excluded: Bridging the Gap in Housing

43 Market Rent as a form of Affordable Housing? Market rent emerge as form of affordable housing? Quality product Well managed Ethical standards Continuing unmet demand from New Excluded Reappraisal of S106 and planning Big and little P politics No need to change statute or objectives

44 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Annual transactions/completions Mortgage availability & transactions collapsed post credit crunch 2,500,000 2,000,000 1,500,000 1,000, ,000 Mortgage Completions Transactions Shortfall in transactions 0 Source: HMRC, CML

45 Under 20k 20k to 30k 30k to 40k 40k to 50k 50k to 60k 60k to 70k 70k to 80k 80k to 90k 90k to 100k Transactions per annum Needs more affordable provision The profile of the shortfall varies by household income and region 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 London South of England Househol Source: Savills Research using HM Land Registry

46 Under 20k 20k to 30k 30k to 40k 40k to 50k 50k to 60k 60k to 70k 70k to 80k 80k to 90k 90k to 100k The profile of the shortfall in Midlands and Wales 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Household income of 20k 40k. Average say 25k. Household Income Source: Savills Research using HM Land Registry

47 Midlands: New Excluded Households Can they afford market rents?? Assumed household income averaging 25k Assumed 30% of income is an affordable rent level Averages out at about 625 per month (gross rent) Are market rents affordable to these lower paid income groups?? Time for HA s to re-think their role? Should HA s be meeting this need?? Are politicians & planners ready to re-think s 106 obligations??

48 New Excluded Households Birmingham 1 bed. Can afford market rents. Source: Rightmove

49 New Excluded Households Birmingham 2 bed. Can t afford black areas. Source: Rightmove

50 New Excluded Households Birmingham 3 bed. Can t afford black areas. Source: Rightmove

51 New Excluded Households Leicester 2 bed Source: Rightmove

52 New Excluded Households Nottingham 2 bed Source: Rightmove

53 Thank you Robert Grundy Head of Housing T: M: