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London Residential Development: The Red Book 2012 headlines

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Download your free executive summary. Visit http://www.estatesgazette.com/the-red-book/ …

Download your free executive summary. Visit http://www.estatesgazette.com/the-red-book/

Researched by a dedicated team of market experts, the Red Book is an in-depth review of the current state of the London residential development market across all 33 London boroughs. Based on market data going back to 2001 the analysis allows you to understand and gauge market confidence and conditions in context.

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  • Good morning – my name is Nigel Evans – Team Leader London Residential Research
  • During the course of the next 20 minutes or so I’m going to talk briefly about our data and where it comes from followed by a brief taster of this year’s Red Book
  • If we had a mission statement it would be something like this
  • so I make no apology for spending the next few minutes detailing our methodology
  • so I make no apology for spending the next few minutes detailing our methodology
  • The humble planning application – for us this is where it all starts – this is the trigger source – this is where it all kicks off
  • Planning applications go to committee – shared ownership whatever variant that might be RightBuy, home Buy, nice Buty etc
  • shared ownership whatever variant that might be RightBuy, home Buy, nice Buty etc
  • So where does our data come from? Just saying “our database says”…just isn’t good enough so I make no apology for spending the next few minutes detailing our methodology
  • So where does our data come from? Just saying “our database says”…just isn’t good enough so I make no apology for spending the next few minutes detailing our methodology
  • So where does our data come from? Just saying “our database says”…just isn’t good enough so I make no apology for spending the next few minutes detailing our methodology
  • So where does our data come from? Just saying “our database says”…just isn’t good enough so I make no apology for spending the next few minutes detailing our methodology
  • So where does our data come from? Just saying “our database says”…just isn’t good enough so I make no apology for spending the next few minutes detailing our methodology
  • This number needs unpacking
  • That boost came but it was a highly skewed one
  • So where does our data come from? Just saying “our database says”…just isn’t good enough so I make no apology for spending the next few minutes detailing our methodology
  • Hillingdon Harrow Brent and Ealing supplying in excess of 500 unit starts a piece in the NW – in the SE the situation is a little more compact Greenwich and Lewisham both supplying in excess of 500 unit starts – in the NE – as compact as it gets, just Newham with all the other NE boroughs bar Barking & Dagenham supplying less than 300 unit starts
  • So where does our data come from? Just saying “our database says”…just isn’t good enough so I make no apology for spending the next few minutes detailing our methodology
  • So where does our data come from? Just saying “our database says”…just isn’t good enough so I make no apology for spending the next few minutes detailing our methodology
  • Sounds like a video game but it isnt
  • The legacy of such strong starts of course is a subsequent increase in the number of completions in the following year. Figure 2 shows this sinusoidal relationship clearly.
  • So to maintain this level of starts where is the future supply likely to come from
  • We have not mentioned the two (three if you include Westfield Stratford) Olympic Legacy sites – but they’re in the Red Book. But just out of curiosity what could this borough really supply if there was a determined effort ?
  • Paynes and Borthwick restarted (United House) Convoys Wharf (site preparation) Marine Wharf (now under construction). Only modest starts envisaged for both the Meridien Delta and the GMV element. Phased starts at Kidbrooke Village , Royal Arsenal and New South Quarter. And finally 1,124 units could be on the way for the centre of Croydon in 2012 in the form of the Menta Tower and Ruskin Square developments.
  • 2010 the same number of units within the £0-250k and £251-500k price bands came on to the market. In 2011 the number of units in the £0-250k band increased by nearly 100%.
  • resulting in a 7.9% fall in average capital values at year end for the outer boroughs . Clearly there has been a shift in pricing strategy and that shift is downward . Simply put, more units started in the outer boroughs because developers could sell more.
  • And sell more they did, 46% more than the inner boroughs and a whopping 76% more than sold in the previous year . The cheapest new build unit we could find in 2011 was a 1-bedder in the Southmere Village development in Thamesmead, costing a very nostalgic £89,950 .
  • Consider that in 2010 we had pricing for 147 units over £1m in the central boroughs by 2011 that figure had jumped to 212 units. Prime market Sales too were up by 28%
  • Call it a “Wealth preserver” or a “Safe haven” - London and specifically central London prime and super prime markets are still dominated by the cash-rich investor (to whom 75% LTV ratios and mortgages are of little or no concern)
  • The rise in the £psf value is partly due to an increase in pricing but size too plays a part. Highest £/sq ft value in 2010 - £3,000 psf. (2,000 sq ft) In 2011 the highest was £3,944 psf. (1,200 sq ft) What we may be witnessing is the gradual reduction of the size of super prime stock as demand outstrips supply. Put another way, there is only a finite amount of prime stock out there and even less prime new-build stock
  • The rise in the £psf value is partly due to an increase in pricing but size too plays a part. Highest £/sq ft value in 2010 - £3,000 psf. (2,000 sq ft) In 2011 the highest was £3,944 psf. (1,200 sq ft) What we may be witnessing is the gradual reduction of the size of super prime stock as demand outstrips supply. Put another way, there is only a finite amount of prime stock out there and even less prime new-build stock
  • Q - Is the current climate favouring the volume builder? A - According to the Bank of England’s “Trends in Lending” publication – yes . Lending to small and medium sized businesses has been decreasing since mid 2008
  • We are only looking at the private sector here, the social sector is experiencing its own fiscal constraints , the effect of which will have close parallels with the private sector.
  • In its October 2010 spending review the government announced that it was to reduce the affordable housing budget to £4.4 bn over the next four years. Effectively this reduced the funding for social housing from 40% of the capital cost to around 25%. So, with direct up-front construction grants slashed what is going to replace them The answer to that is The Affordable Rents Programme , where the social housing provider can charge rents of up to 80% market rate.
  • A seismic shift in the funding model From capital subsidy to long term revenue subsidy and this in turn is having an effect on where the developers are going for the additional funding. Traditionally social housing providers went to the banks but consider this: According to Mark Amis, Head of Social Housing Lloyds Banking Group 2008 – Banks charging 20-25 basis points over Libor – loans 30 years + 2011 – Banks charging 250 basis points over the interbank rate – loans <10 years + higher interest rates on existing loans in return for new money . So if the banks are getting increasingly risk averse where will the future funding come from?
  • So where does our data come from? Just saying “our database says”…just isn’t good enough so I make no apology for spending the next few minutes detailing our methodology
  • So where does our data come from? Just saying “our database says”…just isn’t good enough so I make no apology for spending the next few minutes detailing our methodology

Transcript

  • 1. Cam Islingt’Hack Cam Islingt’ Hack den n n ney den ney The Red Book 2012 The R 2012 City City Westm Westm inster inster K&C K&C Lam Lam beth beth Nigel Evans Team Leader London Residential ResearchCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 2. Where our data comes fromPlanning applications, permissions, site visits etc The Red Book headlines: Construction starts and completionsSales and Pricing, Future supply, Finance, Policy Myth BusterCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 3. DataCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 4. If we had our own mission statement: To provide the most accurate,unbiased and comprehensive source of data on the London residential development market Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 5. Where does our data come from? Just saying “our database says” …just isn’t good enoughCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 6. MethodologyCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 7. Trigger source: Planning applicationsCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 8. All residential schemes of 5 units and over in the inner boroughs, 10 units and over in the outer boroughs ...as well as: • student housing • offices • hotels • apart-hotels • care homesCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 9. Committee stage: • Tenure split – private, social (rent or shared ownership*) • Unit mix – 1 bed, 2 bed, 3 bed etc • S106 – (AH (on-site, off-site, payment in lieu), commuted payments for education, transport, health… etc) • CIL – borough, mayoral (*FirstSteps Shared Ownership not FirstSteps Shared Equity)Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 10. And of course: Was planning permission granted/refused/deferred? • Deferred - we’ll get it next time • Refused - we’ll check for appeals • Granted - we’ll site visit it *not just for Islington…Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 11. All of London All 33 Boroughs No exceptions No arbitrary boundaries No selected boroughs All of it We look at…Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 12. 194,000 applications 800 committees Per annumCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 13. Then we visit every single site with permission…Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 14. …as well as all those under constructionCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 15. Site Visits 6 month cycle 33 boroughs 4 questions…Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 16. Has it Started? Has it Finished? Is it being Marketed? Has it Stalled?Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 17. Red Book 2012 HeadlinesCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 18. The number of private residential units which started construction in London during 2011 was 13,186, a 29% increase on the previous year’s figures.Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 19. In last year’s Red Book we stated that… “to get anywhere near normality there needs to be asecondary boost in construction starts by the end of 2011”. Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 20. Figure 3: Outer London construction pipeline 2004-2011 private units Developments of 10 units or more Under const ruct ion Complet ions St art s Construction starts in 14000 12000 10000 outer London at the end of 2011 8000 6000 4000 increased by 53% 2000 0 compared to the previous year, inner 2004 2005 2006 2007 2008 2009 2010 2011 Figure 4: Inner London construction pipeline 2004-2011 private units Developments of 10 units or more Under const r uct ion Complet ions St art s borough starts were 16000 14000 up a mere 1%. 12000 10000 8000 6000 4000 2000 0 2004 2005 2006 2007 2008 2009 2010 2011Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 21. Figure 1: Private sector construction starts Outer v. Inner London boroughs 2011 Developments of 10 units or more 12000 Starts inner boroughs Starts outer boroughs 10000 8000 6000 4000 2000 0 2004 2005 2006 2007 2008 2009 2010 2011 •8,336 unit starts in the outer boroughs •Almost exactly the average figure for starts between 2004 and 2007 the pre-recession “norm”Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 22. So where did all these starts come from? Figure 5: Private-sector starts in the outer sectors 2004-2011 Developments of 10 units or more North w est South w est North east South east 3500 3000 2500 2000 1500 1000 500 0 2 004 2 005 2 006 2 007 2 008 2 009 2 010 2 011 •1,000 more private residential units to the pipeline than they did last year. •Remarkable similarity in terms of their recovery but also of output over time.Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 23. Camden Islingt’n Hackney TowerOuter sector starts 2011 Hamlets City Westminster K&C Lambeth Wandswort h A closer lookCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 24. 3,058 starts Barnet Harrow NW Hillingdon Ealing Brent Camden Islingt’n Hackney Tower Hamlets City Westminster H&F Southwark K&C Hounslow Lambeth Wandswort hCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 25. 3,058 starts Barnet Harrow NW Hillingdon Ealing Brent Camden Islingt’n Hackney Tower Hamlets City Westminster H&F Southwark K&C Greenwich Hounslow Bexley Lambeth SE Wandswort h Lewisham 2,427 starts Bromley 2,427 starts CroydonCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 26. 3,058 1,895 starts Barnet Enfield starts Waltham NE Harrow Haringey Forest Havering NW Redbridge Brent Barking & Hillingdon Camden Islingt’n Hackney Dagenham Newham Ealing Tower Hamlets 1,895 starts City Westminster H&F Southwark K&C Greenwich Hounslow Bexley Lambeth SE Wandswort h Lewisham Bromley 2,427 starts CroydonCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 27. 3,058 1,895 starts Barnet Enfield starts Waltham NE Harrow Haringey Forest Havering NW Redbridge Brent Barking & Hillingdon Camden Islingt’n Hackney Dagenham Newham Tower Ealing Hamlets City Westminster H&F Southwark K&C Greenwich Hounslow Bexley Lambeth SE Wandswort Richmond h Lewisham 956 SW Kingston Merton Bromley 2,427 starts starts Croydon SuttonCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 28. Top performing boroughs in terms of construction start deliveryCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 29. NW Enfield NE Barnet Waltham Harrow Haringey Forest Havering Redbridge Hillingdon Brent Camden Islingt’n Hackney Barking & Newham Dagenham Tower Ealing Hamlets City Westminster H&F Southwark K&C Greenwich > 500 unit starts Hounslow Lambeth Bexley > 400 unit starts Wandswort > 300 unit starts h Lewisham Richmon d < 300 unit starts Merton Kingston Bromley Croydon Sutton SW SECopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 30. Camde Islingt’n Hackn n ey TowerThe schemes within the City Hamlet Westmins s ter K&C Lambe th Wandswo rth sectorsCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 31. North-west sector starts Camd Islingt’ Hack en n ney City Westmi nster K&C Lamb ethCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 32. Harrow construction starts Ca IslinHac Ca IslinHac mde gt’nkne mde gt’nkne West City n y West City n mins K& y K& mins ter C La C La ter mb mb eth eth630 starts –•Stand out development StEdward Homes’Stanmore Place - 816unitsCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 33. Ealing construction starts Ca IslinHac Ca IslinHac mde gt’nkne mde gt’nkne West City n y West City n mins K& y K& mins ter C La C La ter mb mb eth eth575 starts – West 3 - Napier - 281 units (218 private 63 social) West 3 - Napier - 281 units (218 private 63 social)•Not from mega-developments•Rather a number of mediumsized schemes•Largest of which was:Berkeley’s West 3 -Napier Phoenix House – 149 units (135 The Primary – 146 units all private 14 social) private (off-site provision of 103 social units at Salisbury Depot.Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 34. Hillingdon construction starts Ca IslinHac Ca IslinHac mde gt’nkne mde gt’nkne West City n y West City n mins K& y K& mins ter C La C La ter mb mb eth eth551 starts – Ickenham Park – RAF West Ruislip Sandringham – RAF Eastcote•2 RAF bases•2 sports grounds deliveredthe units Arena – Hayes Sports Stadium Holmesgate Place – Hayes FCCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 35. South-east sector starts Camd Islingt’ Hack en n ney City Westmi nster K&C Lamb ethCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 36. Greenwich construction starts Ca IslinHac Ca IslinHac mde gt’nkne mde gt’nkne West City n y West City n mins K& y K& mins ter C La C La ter mb mb eth eth602 starts –•Galliard’s New CapitalQuay (the rebrandedGreenwich Reach) 980 unitsprogressing rapidly throughout the year.Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 37. Lewisham construction starts Ca IslinHac Ca IslinHac mde gt’nkne mde gt’nkne West City n y West City n mins K& y K& mins ter C La C La ter mb mb eth eth591 starts –•Barratt’s Renaissance inLoampit Vale - 788 unitscontinues at rapid pace.Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 38. North-east sector starts Camd Islingt’ Hack en n ney City Westmi nster K&C Lamb eth That means NewhamCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 39. Newham construction starts Ca IslinHac Ca IslinHac mde gt’nkne mde gt’nkne West City n y West City n mins K& y K& mins ter C La C La ter mb mb eth eth791 starts - Stratford Halo -Genesis/Paddington Churches’ Rathbone Market - (Vermillion – Fizzy Living)Three big constructionhotspots:•Stratford High Street•Canning Town• Royal Docks•2,146 residential units intotal. Waterside Park - Barratt Rathbone Market - (East City Point)Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 40. The legacy of construction startsCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 41. Figure 2: London construction pipeline 2004-2011 privateand social combined Developments of 10 units or more45000 Under Const ruct ion Complet ions St art s Legacy:40000 •70% of units under construction35000 at the end of one year will30000 complete during the following one.25000 •End of 2012 - 7,000 private unit20000 completions in the outer boroughs.15000 •1,000 units short of the10000 2004-2007 norm 5000 •Normal output should return in 0 2013 – if we maintain this level 2004 2005 2006 2007 2008 2009 2010 2011 of starts. Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 42. Future supply Camde Islingt’n ackn H n ey Tower City Hamlet Westmin s ster K&C Lambe th Wandsw orthCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 43. As we have said we are fairly confident in ourprediction of completions at the end of 2012. But where are the new starts likely to come from?Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 44. Future supply – North-westPossible 2012-13starts: Harrow Barnet•Harrow - Land Sec’s Kodak site NW Hillingdon Ealing Brent•Barnet - Estate regeneration atHendon Waterside Hounslow•Hillingdon - RAF Uxbridge Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 45. Future supply – North-eastPossible 2012-13 Enfieldstarts: NE Waltham Haringey Forest Redbridge Havering•Stratford (Strand East) Newham Barking & Dagenham•Canning Town (future phasedstarts)•Royal Docks (Minoco Wharf)According to LSE research -Most of the opportunities for newdevelopment – some 43% - will befound in the east of London. Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 46. Possible future supply – North-east and a bit of Tower Hamlets Enfield Olympic Legacy•50,000 residential Waltham Forest Haringey Minoco Wharf Redbridge Haveringunits Silvertown Quays Canning Town Albert Dock•Bigger than Grantham Barking & Dagenham Crown Wharf Newham•Same size as the Pura SiteMayor’s pledge to build Wood Wharf55,000 affordable Barking Riverside Thames Road Industrial Estatehomes during his secondterm. Gallions Reach Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 47. Future supply – South-eastPossible 2012-13starts:•The wharfsPaynes and Borthwick restarted(United House) Greenwich BexleyConvoys Wharf (?)Marine Wharf (now under SE Lewishamconstruction). Croydon Bromley• CroydonMenta TowerRuskin Square1,124 units Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 48. So more units started construction in the outer boroughs – Why?Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 49. Figure 2: Outer borough private sector Figure 3: Inner borough private sector price bands 2011 Developments of 10 units price bands 2011 Developments of 10 units or more or more 2 010 2 011 2 010 2 0111 400 1 4001 200 1 2 001 000 1 000 800 800 600 600 400 400 200 2 00 0 0 £0- £250k £251 - £500k £501 - £750k £751 - £1 m £1 m + £0- £2 50k £251 - £500k £501 - £75 0k £751 - £1 m £1 m + •One of the major contributing factors was affordability. •Compare the number of units within specific price bands which came on to the market in 2010 and 2011 Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 50. Figure 2: Outer borough private sector price bands2010 2011 Developments of 10 units or more 2 010 2 011 1 400£0-250k and £251-500k 1 200bands the same 1 000 8002011 600£0-250k band 400increased by nearly 200100%. 0 £0- £250k £251 - £500k £501 - £750k £751 - £1 m £1 m + Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 51. -7.9% Average price (£/sq ft) Average price (£’000) Average size (sq ft) 2011 2010 % change 2011 2010 % change 2011 2010 % change Inner London 763 719 6.1% 615 576 6.7% 806 800 0.8% North East 370 448 -17.1% 258 323 -20.1% 696 721 -3.4% South East 398 390 2.0% 281 285 -1.4% 706 731 -3.4% South West 411 486 -15.4% 279 353 -20.9% 679 726 -6.4% North West 474 499 -5.0% 357 366 -2.4% 752 733 2.5% Outer London 422 450 -6.2% 302 328 -7.9% 717 729 -1.6% All London 594 604 -1.6% 451 463 -2.5% 759 768 -1.1% •7.9% fall in average capital values at year end for the outer boroughs. •Shift in pricing strategy •More starts in the outer boroughs because developers could sell moreCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 52. •46% more sales thanthe inner boroughs Table 2. Inner London sales units under construction or completed 2009-2011 - Developments of 10 units or more Year Sold Unsold Sold in Year 2009 4,296 9,229 1,659•76% more than 2010 2011 4,447 3,908 6,792 7,592 2,134 2,571sold in the previous year. % change from 2010 -12% 12% 20% Table 3. Outer London sales units under construction or completed 2009-2011 Developments of 10 units or more•Cheapest new build Year Sold Unsold Sold in Yearunit a 1-bedder in the 2009 3,307 7,480 2,128Southmere Village 2010 3,033 8,723 2,125costing a very nostalgic 2011 4673 11,030 3,744£89,950. % change from 2010 54% 26% 76% Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 53. But what of the inner London boroughs?Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 54. + 6.7% Average price (£/sq ft) Average price (£’000) 2011 2010 % change 2011 2010 % change Inner London 763 719 6.1% 615 576 6.7% North East 370 448 -17.1% 258 323 -20.1% South East 398 390 2.0% 281 285 -1.4% South West 411 486 -15.4% 279 353 -20.9% North West 474 499 -5.0% 357 366 -2.4% Outer London 422 450 -6.2% 302 328 -7.9% All London 594 604 -1.6% 451 463 -2.5% •7.9% fall in average capital values in the outer boroughs. •6.7% rise in average capital values in the inner boroughs •The polar oppositeCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 55. What’s going on?Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 56. Figure 3: Inner borough private sector price bands 2011 Developments of 10 units or more 1 400 2 010 2 011 1 2 00 1 000 800 600 400 2 00 0 £0- £2 50k £251 - £500k £501 - £75 0k £751 - £1 m £1 m + •2010 we had pricing for 147 units over £1m •2011 that figure had jumped to 212 units. •Prime market Sales up by 28%Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 57. •The outer borough market is being driven by debt •The inner boroughs by equityCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 58. Figure 3: Outer London construction pipeline 2004-2011 private units Developments of 10 units or more Under const ruct ion Complet ions St art s High volumes 14000 12000 Low prices 10000 8000 6000 4000 2000 0 2004 2005 2006 2007 2008 2009 2010 2011 Figure 4: Inner London construction pipeline 2004-2011 private units Developments of 10 units or more 16000 Under const r uct ion Complet ions St art s Low volumes 14000 12000 High prices 10000 8000 6000 4000 2000 0 2004 2005 2006 2007 2008 2009 2010 2011Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 59. “Wealth preserver” “Safe haven” - prime and super prime markets still dominated by the cash-rich investorCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 60. 6.1% Average price (£/sq ft) Average price (£’000) 2011 2010 % change 2011 2010 % change Inner London 763 719 6.1% 615 576 6.7% North East 370 448 -17.1% 258 323 -20.1% South East 398 390 2.0% 281 285 -1.4% South West 411 486 -15.4% 279 353 -20.9% North West 474 499 -5.0% 357 366 -2.4% Outer London 422 450 -6.2% 302 328 -7.9% All London 594 604 -1.6% 451 463 -2.5%Along with a rise in capital values there was also an increase in £ per sq ft valuesCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 61. Rise in the £psf value is partly due to an increase in pricing but size too plays a part. •2010 – highest £ per sq ft £3,000* •2011 – highest £ per sq ft £3,944* •2011 unit was half the size of the 2010 one •Gradual reduction of the size of super prime stock as demand outstrips supply. •Finite amount of prime stock and even less prime new- build stockCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 62. BuildingName MainPC Price sq ft £psf Bulgari Hotel & Residences SW7 £98,000,000 14,000 £7,000 Bulgari Hotel & Residences SW7 £69,000,000 9,260 £7,451 10 Cornwall Terrace NW1 £59,000,000 14,409 £4,095 10 Cornwall Terrace NW1 £59,000,000 11,797 £5,001 10 Cornwall Terrace NW1 £45,000,000 11,233 £4,006 10 Cornwall Terrace NW1 £39,000,000 10,517 £3,708 10 Cornwall Terrace NW1 £39,000,000 10,772 £3,620 10 Cornwall Terrace NW1 £29,000,000 8,059 £3,598 10 Cornwall Terrace NW1 £29,000,000 8,833 £3,283 10 Cornwall Terrace NW1 £26,000,000 7,766 £3,348 21 Chesham Place SW1X £25,500,000 6,260 £4,073 21 Chesham Place SW1X £39,250,000 7,916 £4,958Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 63. More and more equity chasing ever decreasing amounts of prime stock Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 64. Survival of the biggest? or What the planning pipeline has to tell us about the type of future developerCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 65. Figure 2: Rate of growth in the stock of lending to SMEs. Percentage changes on a year earlier. Non seasonally adjusted. 2 0.0 15.0 10.0 5.0 0.0 -5.0-10.0 Source: Bank of England, BBA, BIS and Bank calculations. Q - Is the current climate favouring the volume builder? A - According to the Bank of England’s “Trends in Lending” publication – yes. Lending to small and medium sized businesses has been decreasing since mid 2008Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 66. Figure3: Comparison of number of schemes with total number of unitsconsented within each year 2004 to 2011 Developments of 10 units or more Schemes500 35000 Units The number of units is450400 30000 increasing whilst the number of schemes is going350 25000300 20000250 15000 down. This can only mean one200150 10000 thing, the size of schemes100 5000 is getting bigger. 50 0 0 2004 2005 2006 2007 2008 2009 2010 2011 This reluctance of lenders to provide development finance SMEs appears to be reflectedin the planning pipeline. Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 67. The banks’ focus has moved away from newborrowers to core clients, and that means the volume buildersCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 68. Social sector - fiscal constraintsCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 69. Affordable Homes ProgrammeCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 70. •The Government to reduce the affordable housing budget to £4.4 bn over the next four years. •Funding for social housing will drop from 40% of the capital cost to around 25%. •Up-front construction grants slashed •Where will future funding come from?Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 71. The Affordable Rents Programme - rents of up to 80% market rate. The G15 Group of social housing providers (in response to the mayor’s Revised Housing Strategy) “The new Affordable Rent product places a significantly greater risk with housing associations, not least because of the high levels of and more expensive debt”.Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 72. A seismic shift in the funding modelFrom capital subsidy to long term revenue subsidyWhat about the banks?.Mark Amis, Head of Social Housing Lloyds Banking Group •2008 – Banks charged 20-25 basis points over Libor – loans 30 years+ •2011 – Banks charged 250 basis points over the interbank rate – loans <10 years + higher interest rates on existing loans in return for new money.So if the banks are getting increasingly risk averse where will the futurefunding come from? Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 73. We envisage a shift in social housing provider financing, frombanks to: •Property management funds •Insurance companies •Pension fundsAviva, AXA and Henderson already allocating existing funds for propertysenior debt •Increase in jvs between housing associations, private developers, local authorities and other bodies •Mergers between social housing providersAs we pointed out for the private sector this is going to be the survival of thebiggest.Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 74. Myth BusterCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 75. 56Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 76. The number of affordable homes started in London in the six months to the end of September 2011 was 56 Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 77. This is not the number of schemes but the number of individual unitsCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 78. Copyright EGi 2012. Download 56 your free exec summary visit www.estatesgazette.com/the-red-book/
  • 79. Copyright EGi 2012. Download 56 your free exec summary visit www.estatesgazette.com/the-red-book/
  • 80. S H AP P S H U M P H R E YSCopyright EGi 2012. Download 56 your free exec summary visit www.estatesgazette.com/the-red-book/
  • 81. 56 relates to the number of starts funded underthe new Affordable Homes Programme which took over from the old National Affordable Housing Programme in 2011 Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 82. 56It is not the number of affordable units which started construction during the periodCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 83. The real figure is 4,200 unit starts in the six months to September 2011 Of those: •2,730 units were for social rent •1,470 units were for intermediate housing Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 84. But how can you be so sure?Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 85. To be sure that the real figure is this: 4,200Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 86. And not this: 56Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 87. You’d have to visit every single site that had planning permission or was under construction…Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 88. In the whole of London…Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 89. …possibly take a picture to verify the state of playCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 90. And do it at least twice a year…Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 91. Which is exactly what we did 130 site visits per weekCopyright EGi 2012. Download x your free exec summary visit www.estatesgazette.com/the-red-book/
  • 92. What we haven’t talk aboutCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 93. We haven’t talked about: Student Housing Demand, pipeline, oversupply?Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 94. We haven’t talked about: Inner borough pipeline Flat growth in all boroughs?Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 95. We haven’t talked about: Individual Boroughs Scheme by schemeCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 96. We haven’t talked about:Postcode level sales and pricingCopyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 97. We haven’t talked about:Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/
  • 98. Cam Islingt’Hack Cam Islingt’ Hack den n n ney den ney The Red Book 2012 The R 2012 City City Westm Westm inster inster K&C K&C Lam Lam beth beth Purchase The Red Book 2012 TodayVisit http://www.estatesgazette.com/the-red-book/Copyright EGi 2012. Download your free exec summary visit www.estatesgazette.com/the-red-book/