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Residential Market Analysis. Marcus Dixon Associate Director Savills Residential Research Dec 2009. Back on Track?. Nationwide up 7.6% since February Transactions up from 41,000 in February to 82,000 in September Prime central London up 8.4% since Q1 09 Prime SW London up 15.3% since Q1 09 - PowerPoint PPT Presentation
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Residential Market Analysis
Marcus Dixon
Associate Director
Savills Residential Research
Dec 2009
Back on Track?•Nationwide up 7.6% since February
•Transactions up from 41,000 in February to 82,000 in September
•Prime central London up 8.4% since Q1 09
•Prime SW London up 15.3% since Q1 09
•Prime London suburbs up 7.87% since peak
Affordability remains high….in theory!
40%
60%
80%
100%
120%
140%
160%
1971 Q1
1974 Q1
1977 Q1
1980 Q1
1983 Q1
1986 Q1
1989 Q1
1992 Q1
1995 Q1
1998 Q1
2001 Q1
2004 Q1
2007 Q1
-60%
-40%
-20%
0%
20%
40%
60%
Nominal House Price GrowthReal House Price GrowthSurplus Income as % of Basic Spend
Source: Savills
0
20
40
60
80
100
120
140
160
180
Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09
'00
0s
Cash Purchasers Residential Transactions
Mortgage Completions
Source: IR, CML
the market has divided into the equity haves and the equity have-nots …
LTVsaffect deposit affordability
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
Q1 1980 Q1 1986 Q1 1992 Q1 1998 Q1 2004 Q1 2010
Home Mover Deposit as % of income FTB Deposit as % of income
Source: CML / Savills
The adopted mainstream UK forecast
183,855
156,828
162,561
151,877
155,987
164,567
177,732
187,952
197,917
11,867
(27,027)
5,733
(10,684)
4,110
8,579
13,165
10,220
9,966
Av Price
Change
Source: Savills (forecast of Nationwide quarterly index)
Equity as % ofHouse Price 2004
0.7 to 1
0.6 to 0.7
0.5 to 0.6
0.25 to 0.5
-1 to 0.25
Regionally
Equity rich areas to lead the recovery
46%46%46%46%46%46%46%46%46%
64%64%64%64%64%64%64%64%64% 73%73%73%73%73%73%73%73%73%
40%40%40%40%40%40%40%40%40%
44%44%44%44%44%44%44%44%44%
60%60%60%60%60%60%60%60%60%51%51%51%51%51%51%51%51%51%
52%52%52%52%52%52%52%52%52%
37%37%37%37%37%37%37%37%37%
67%67%67%67%67%67%67%67%67%
67%67%67%67%67%67%67%67%67%
Yeah of recovery to 2007 levels(2009 - 2020 growth)
2013201420152016
Land & Development
99170 211 236
287
383
512
655
797
892
966
1,018
0
200
400
600
800
1,000
1,200
1,400
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Cumulative shortfall (000,s)
Shortfall (000,s)
Housing Completions (000,s)
Savills Household Projections (000,s)
long term, housing remains a rare commodity
0
50
100
150
200
250
Q490 Q492 Q494 Q496 Q498 Q400 Q402 Q404 Q406 Q408 Q410 Q412
Uni
ts (
000s
) ro
lling
12
mon
ths
tota
l
Starts Savills Starts Forecasts
Completions Savills Completions Forecasts
Source: CLG/ Savills
activity has bounced back (in some markets)
and so we are seeing land markets level
trading on smaller less risky sites
in higher value markets
0
20
40
60
80
100
120
Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09
Land
val
ue in
dex,
Sep
200
7=10
0
Greenfield Urban Central London
Source: Savills Research
… but many large sites will remainunder water
Source: Savills Research
0
25
50
75
100
125
150
175
200
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
UK
Indic
es,
2007 =
100
Greenfield development land (actual) Bulk land forecastServiced Plots forecast UK new house price (& fcst)
BUT….Small sites cannot meet targets
need to bring forward large sites too
0
25
50
75
100
125
150
175
200
19
79
19
81
19
84
19
86
19
89
19
91
19
94
19
96
19
99
20
01
20
04
20
06
20
09
20
11
20
14
20
16
20
19
20
21
20
24
20
26
UK
In
dic
es,
20
07
= 1
00
Greenfield development land index (actual)
Forecast (bulk land)
Serviced Plots forecast
Av. UK new build house prices (& forecast)
Source: Savills Research, Nationwide
Medium-term land development play 454%
Long-term placemaking & land stewardship 974%
Long-term placemaking & plot sales 713%
the value uplifts from a new land development model should be compelling
but this would mean moving away from the linear model of development …
Landownership
Finance Design,planning
Construction,marketing
PropertyOwnership(Investor andoccupier)
Land ownership/acquisition
Management
PropertyOwnership
Finance
Masterplanning/Planning
Design/Engineering
Phasing/Construction/
Marketing
to one that deals with the barriers that are many and complex
Landacquisition/ownership
Management
PropertyOwnership
Finance
Masterplanning/Planning
Design/Engineering
Phasing/Construction/
Marketing
new, long-term models are needed
A new vehicle &mechanisms for
participation in value upliftare needed
