CIH Private Rented Sector Conference pdfs/Presentations/PRS...Help to Buy - Equity Loan Help to Buy...
Transcript of CIH Private Rented Sector Conference pdfs/Presentations/PRS...Help to Buy - Equity Loan Help to Buy...
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Who’s investing?
What’s happening in the PRS market?
Why now?
What do renters want?
Where next?
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Who’s investing?
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Who? 1994
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Who? 2014
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Changing markets, changing times..
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Why now?
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Why? lack of opportunity
Source: IPF 2014
£580
£661
£752
£867
£835
£632
£587
£642 £663
£650 £647
£400
£500
£600
£700
£800
£900
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Commercial Property Universe, £bn
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Why? strong relative performance
9 Source: Savills, IPD, Bloomberg
0%
2%
4%
6%
8%
10%
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
Annualis
ed t
ota
l re
turn
s (
13 y
ears
)
Risk (Standard deviation)
IPD Commercial Property UK Residential London Residential Equities Gilts
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Why? illiquidity remains a feature
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
Average 2002 - 2007
Year to Q2 2013
2014 2015 2016 2017 2018
Mortgaged FTB* Mortgaged Home Mover*
Mortgaged BTL Cash Buyers
Help to Buy - Equity Loan Help to Buy - Mortgage Guarantee
Source: Savills Research, CML, HMLR
Help to Buy boosts transaction
levels by around 12%
Forecast transaction levels
in 2018 at circa 1.2 million
Current
housing
transactions
below 1m
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Why? help to buy a drop in the ocean
Source: DCLG, HMLR
28,50
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Why? supply and demand
Source: DCLG, Savills Research
0%
10%
20%
30%
40%
50%
60%
70%
80%
1915
1920
1925
1930
1935
1940
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
Pro
port
ion o
f housin
g in E
ngla
nd
Owner
Occupied
Social Rented
Private Rented -
5.7m dwellings by
2018
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Why? supply shortfalls
Source: HBF, DCLG
0
20,000
40,000
60,000
80,000
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140,000
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180,000
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220,000
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New
housin
g u
nits p
.a.
Private Enterprise Housing Associations
Local Authorities Demand Projections
Savills Forecast
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Why? supply shortfalls across the country
Source: CLG, ONS
0
10,000
20,000
30,000
40,000
50,000
60,000
Net additio
nal dw
elli
ngs/
household
s
Supply 2012/13 Household projections
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0
2000
4000
6000
8000
10000
12000
14000
Lower Mainstream (<£450psf)
Mid Mainstream (£450-700psf)
Upper Mainstream
(£700-£1,000psf)
New Prime (£1,000-
£2,000psf)
Super Prime (>£2,000psf)
An
nu
al
co
mp
leti
on
s (
Lo
nd
on
)
Supply (Annual) Demand (Annual)
Source: Savills
Why? supply shortfall greatest below £700psf
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Why? rising demand across a wide geography
Source: Census
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Why? PRS expanding fastest outside central areas
Source: Census 2011 & 2001
Area % PRS
households
Growth in PRS
households
2001 - 2011
Westminster 43% 37%
City of London 41% 43%
RBKC 39% 27%
Newham 35% 96%
Camden 34% 31%
Area % PRS
households
Growth in PRS
households
2001 - 2011
Barking & Dg’m 19% 176%
Tower Hamlets 34% 135%
Enfield 24% 116%
Hackney 30% 108%
Greenwich 21% 96%
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Why? 70% of demand is PRS
Below £700
psf...
...70% of the
demand is for
PRS
Source: Savills
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What do renters want?
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Segments of demand
Age
2011 PRS
Households
England &
Wales
2011 PRS
Households
London
Up to
25 508,000 12% 77,000 9%
25-34 1,388,00
0 33% 356,000 41%
35-44 994,000 24% 219,000 25%
45-64 931,000 22% 163,000 19%
65+ 395,000 9% 47,000 5%
0% 50% 100% 150%
65+
45-64
35-44
25-34
Up to 25
Growth in PRS Households 2001 - 2011
London England & Wales
Source: 2011 Census
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Reasons for renting
0%
10%
20%
30%
40%
50%
60%
70%
80%
18 to 24 25 to 34 35 to 44 45+
Can’t afford the deposit to buy a property
Can’t afford the monthly payments of a mortgage
Don’t meet the lending criteria for a mortgage
Flexibility
Source: Savills / YouGov
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Tenancy length less important
0%
20%
40%
60%
80%
100%
18 to 24 25 to 34 35 to 44 45+
Age of Respondent
Would you like a longer tenancy agreement?
Agree Ambivalent Disagree
Source: Savills / YouGov
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Reasons for moving
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
London Other cities
Source: Savills / YouGov
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Reasons for moving
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
London Other cities
Source: Savills / YouGov
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Reasons for moving
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
London Other cities
Source: Savills / YouGov
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Location is key
0%
10%
20%
30%
40%
50%
60%
0 to 5 6 to 10 11 to 15 16 to 20
Hig
h o
r m
id im
po
rta
nc
e
Minutes travel to public transport
Walk Cycle Drive
Source: Savills / YouGov
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Where next?
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New Market Entrants
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What? still a long way to go to get scale
0%
10%
20%
30%
40%
50%
60%
70%
Under £10m
£10 to £20m
£20 to £50m
£50 to £100m
Over £100m
2012 2013
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2012 2013
Developer Institution
Private Company Private Equity
Listed Registered Provider
Source: Savills
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Where next? build to rent on large sites
Source: Savills Research
Canary Wharf
Wembley
Stratford
Croydon & Hackbridge
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Where next? investors moving into development
APG / Grainger plc
£349.4m
Acquisition
National Portfolio
January
M&G Real Estate /
Berkeley Group
£105.4m Acquisition
London & South
East
March November
APG / Delancey
Development JV
Elephant &
Castle, London
Sigma Capital /
Gatehouse Bank
£700m Funding for
6,500 Rental
Homes
across UK
October December
LB Croydon / John
Laing / Essential
Living
230 PRS Apartment
Taberner House,
Croydon
February
Places for People /
Terrace Hill
901 units
West Mids, North
West, Scotland
May
Places for People /
Urban Splash
634 units
North West, South
West, Yorkshire &
Humber
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Case study
83 units PRS
200 apartments other
tenures
Savills development
team advised on
comparable
transactions,
aggregate values per
apartment,
Prices, yields,
discounts
Design and
development advice
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Case study
18 flats 4x 1b 14x2b
Within block of 40
125 year lease from
2006
£486 service charge
p.a.
Total residential floor
area GIA – 970/sq m,
10,444 sq/ft
Unallocated car
parking
Apartments let on
AST;s or licences
£122,460 passing rent
p.a.
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Case study
Savills RCM team plus Bristol Development
Team, regional valuation teams advised on
PfP’s acquisition of £77.7m portfolio
656 apartments in 9 schemes – Manchester,
Stalybridge, Leeds, Bradford, Bristol, Plymouth
481 parking spaces
Ground rents from 540 apartments
Urban Splash retained by PfP for 3 years –
sales and management contract
Growing appetite from major investors in
regional PRS
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Where next? deal structures for build to rent
Forward purchase completed stock Deposit plus payment on PC
+ Simple and fast
- Risk to developer, investor control of product
Land acquisition and development + Well understood
- Resource intensive, planning risk, build cost and market risks
Forward fund from a developer Phased payments to cover land, fixed construction costs, investment value
+ Control of product and development risk for investor, certainty for developer
+ Less resource intensive so scaleable
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Where next?
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Build to rent philosophy
Renter rents the whole building and not just single unit
Foster community experience
Encourage tenants to make ‘friends’
On-site team that know the tenant
Increase rents through product differentiation and offer
Reduce voids by providing exceptional customer service- target 96% occupancy
Budget for and control CapEx
Design for Maintenance and Durability
Charge for Additional Services
Manage, manage, manage!
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Management is different
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Where next?
Strong rental markets
Transport & Amenities
Economic prospects
Communities / Regeneration
Designed for rental
purposes
Specification
Unit mix and layouts
Scale & efficiencies
Influencing
Performance
Rental pricing
Control of costs
Customer interface
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Discussion