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Residential Development Overview

Residential Development Overview. Lucian Cook. The UK Housing Market: A living statue?. Mortgage finance is still limited The economy is still fragile Base rates are still low Lenders margins are still high First time buyer deposits are still prohibitive

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Residential Development Overview

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  1. Residential Development Overview Lucian Cook

  2. The UK Housing Market: A living statue? • Mortgage finance is still limited • The economy is still fragile • Base rates are still low • Lenders margins are still high • First time buyer deposits are still prohibitive • The market still favours equity rich areas

  3. Impact on Mainstream Source: Nationwide, HMRC

  4. Forecasts

  5. House builder’s perspective Estimate 2012 Source: DCLG, Reuters

  6. Building into stronger markets Source: Land Registry

  7. Forecasts

  8. The Generation Game

  9. The Generation Game

  10. The Generation Game

  11. The Generation Game

  12. Government perspective 1% extra GDP from building an additional 100,000 homes 45% of the 5 year land supply in strategic sites

  13. The first time buyer • The average deposit for the first time buyer in the UK in 2011 was £26,000. • 5 years ago it was £12,000. • 10 years ago it was £6,300. • The number of ‘private rented’ households in the UK stands at 4.8 million (est). • 5 years ago it was 3.4 million. • 10 years ago it was 2.5 million. Source: CLG, CML

  14. Equity loans 42,000 sales funded with Government funded equity loan

  15. Embracing the rental sector • Private-rented households in the UK to rise by a further 1.1m (23%) over the next five years. • The amount of rent paid by private tenants to rise from £48 billion to £70 billion. • £200 billion needs to be invested in the private rented sector. • We only expect 25% of this will come from ‘buy-to-let’ mortgage finance. • Opportunities for funds & institutions, property companies and private equity. • Linked to contractors, developers & managers.

  16. Build to let - the silver bullet?

  17. Build to let - the silver bullet?

  18. Meeting the requirement Income Yield & IRR requirements Scale & Management Development Viability

  19. Let’s build a rocket boys! • Dedicated rental term allows property to be valued on an investment basis by reference to investors IRR requirements. • A discount to VP allows increased gross and net income yields. • Value sensitive to required IRR and length of user restriction. • That would affect the mix of market, private rented and affordable housing that is financially viable and meets local housing needs. • Neither 100% PRS nor 0% affordable?

  20. A changing planning environment

  21. At a national level Driven by Gradual increase in transactions NewBuy Get Britain Building Growing Places but fewer affordable homes

  22. At a local level Source: Savills using DCLG data

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