RESI 09 Review

Some of my notes & soundbites from the recent, excellent Property Week RESI 09 conference.  It was a surprisingly upbeat event particularly in the opening session and the speakers were excellent.

John White – Chairman, Persimmon, House Builder:

  • The house building industry has reduced its headcount by 40-50% as a result of the credit crunch
  • House builders will be extremely cautious when investing for the next few years particularly on large sites which will be delayed.  Small sites will be developed in preference.
  • It’s unlikely-impossible to imagine supply meeting demand in future.
  • We’re 3-5 years off returning to peak [supply] volumes on an optimistic forecast.

Dr Ian Shepherdson – Chief US Economist, High Frequency Economics (commenting on UK housing):

  • We’re on the verge of a real turning point.  I’m more cheerful about housing than I have been for many years.
  • European economies have weakened further than either the UK or the US.
  • The debt to disposable income ratio had reached an unprecendented level.
  • We’ve begun a long run shift back into savings.
  • There are shopping centres that were built in the last 3 years that are empty now and will probably fall down before they’re occupied.
  • In the US they’re pulling shopping centres down now.
  • Better affordability is lifting housing and there is an inventory shortage.
  • Long run UK housing is well supported – higher birthrate and much younger population profile.
  • Housing has hit bottom.
  • Possibility of a price wobble next year and unemployment will remain high.
  • Interest rates are not going to go back up again soon – maybe not in my lifetime.
  • Housing will perform better than the broader economy because new unendebted first time buyers will drive the market while the economy as a whole will be held back by the average debt burden.

Bill Hughes – Managing Director, Legal & General Property:

  • I’m seriously excited.
  • It’s a widely held view that now is the sweetspot for the emergence of Resi to the institutional sector.
  • Why? – Low correlation to other asset classes.
  • Why? – The scale of the opportunity.
  • Why? – Long term liability matching.
  • Why? – Attractive total return.
  • Why? – Attractive income return.
  • Why now? – Significantly down on historic completions.
  • Why now? – Capital constraints in house building.
  • Why now? – Accidental high level of bank exposure to the sector.
  • Why now? – Pricing opportunity (house price to earnings) & we haven’t yet missed the boat.
  • Broad agreement across the HCA, banks, house builders & investors to find a solution [to institutional investment in build for rent and the private rented sector].
  • Looking for 5-6% net yield.

Ian (apologies I forget his full name): ‘I’m nervous the Tories might cut capital spending on affordable housing – while there are already several million people on the waiting lists’.
Nigel Hugill – Lend Lease & the Homes & Communities Agency (based on OECD forecasts):

  • The UK has one of the 4 strongest correlations between housing and economic growth and the shortest lag of all.
  • Supply has been within 10% of 180,000 units per annum for 40 years.  It’s now down to 80-85,000 units.
  • First time buyers are now at 40% which is historically very high.
  • Rent to buy is to grow with saving up to buy set to encourage good rental behaviour.

Nick Candy – Founder & Joint CEO, Candy & Candy:

  • London geographically is the best positioned city in the world.
  • People still have money, they’re just sitting on it. 
  • And the way the banks are reacting just means they will take even longer to spend it.
  • With the Euro where it is it’s cheap to buy in London.
  • A lot of money will come in from India and the Middle/Far East

Tony Pidgley – Chief Executive, The Berkeley Group – Addressed to the government – ‘Leave the market alone’ – principally in reaction to restrictions on production of units of c40sqm or less, which are the only units selling well.

Chris Tinker – Chairman, Crest Nicholson Regeneration – There is a likely further shortfall of 1.1m homes against a 2m target over the next 10 years.

Andrew Pratt – Managing Director of Residential, Grainger – Residential outperforms every other asset class certainly over the medium to long term.

Roger Madelin – Joint Chief Executive, Argent – On government quango’s – We risk disappearing into a big pile of [bureaucratic] poo.

Advertisements

Leave a comment

No comments yet.

Comments RSS TrackBack Identifier URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s