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2010 IPD Residential Index Results Presentation

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The Results of the 2010 IPD UK Residential Index. Some very interesting insights inside so do check it out.

The Results of the 2010 IPD UK Residential Index. Some very interesting insights inside so do check it out.

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  • 1. IPD 2010 UK ResidentialIndex Launch On the pulse ofWednesday 16th March 2011 the property worldOne Moorgate Place, London
  • 2. Welcome On the pulse ofPhil Tily, Managing Director of UK & the property worldIreland, IPD
  • 3. On the pulse ofProgramme the property world09.00 Chair welcome and introduction Sue Foxley, Cluttons09.10 UK Residential index results and 10 year performance comparison Mark Weedon, IPD09.35 Reflections on Returns Trevor Moross, Dorrington09.50 Panel discussion Alan Collett, Allsop Alan Patterson, AXA REIM Neil Young, Young Group Voting questions Q&A from audience10.30 Launch Close www.ipd.com © IPD
  • 4. IPD Residential IndexLaunchResidential investment, The Decade On the pulse of the property worldMark Weedon, IPD
  • 5. Overview On the pulse of the property worldDatabase ContributorsAnnington Homes Grainger plcCadogan Estates Grosvenor EstatesCordea Savills LLP Grosvenor Fund ManagementThe Church Commissioners Invista REIMThe Crown Estate Martin’s PropertiesDorrington plc South Kensington EstatesD&G Investment Management Terrace Hill Group plcEvenbrook Unite GroupGenesis homes www.ipd.com © IPD
  • 6. Residential Overview On the pulse of the property worldSponsors www.ipd.com © IPD
  • 7. Residential Investment Market On the pulse of the property worldInvestment value at year end, £mSize of IPD residential databank, end 2010 Size of residential market let index, 2001-2010 (£B) Market Let Properties Other Residential Leases* 3 2.48 2.39 2.26 2.28 2 £2.48bn 1.72 1.77 £1.85bn 1.56 1.41 1.26 7597 PROPERTIES 1 0.75 0£4.33bn 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010•These non-market let units are excluded from the IPD residential index but are available for analysis as part of IPDs residential benchmarking service. © IPD Mar-11 www.ipd.com
  • 8. Residential MarketperformanceMarket Let standing investments and otherasset classes, 2000-2010 On the pulse of the property world
  • 9. Residential investment performance On the pulse of2010 the property worldTotal return, Income return and capital growth Income Return Capital Growth Total Return 12.0 10.4 10.0 8.0 7.4 % 6.0 4.0 2.0 2.8 0.0 All Residential Market lets www.ipd.com © IPD
  • 10. Regional investment performance 2010 On the pulse of the property worldTotal return, Income return and capital growth 15.0 Income Return Capital Growth Total Return 10.0 5.0 % 0.0 -5.0 -10.0 www.ipd.com © IPD
  • 11. Regional investment performance 3 yrs On the pulse of the property worldTotal return, Income return and capital growth 6.0 Income Return Capital Growth Total Return 4.0 2.0 0.0 %-2.0 -4.0 -6.0 -8.0 -10.0 www.ipd.com © IPD
  • 12. Regional investment performance: 5 yrs On the pulse of the property worldTotal return, Income return and capital growth 11.0 Income Return Capital Growth Total Return 9.0 7.0 5.0 %3.0 1.0 -1.0 -3.0 -5.0 www.ipd.com © IPD
  • 13. Regional investment performance: 10 yrs On the pulse of the property worldTotal return, Income return and capital growth Income Return Capital Growth Total Return 10.0 8.0 6.0 % 4.0 2.0 0.0 www.ipd.com © IPD
  • 14. 2010 Residential vs Other assets On the pulse of the property worldInvestment Performance by asset class, % TR pa. Residential Market lets All Commercial Property Gilts Equities Retail Office18.0 Industrial16.014.012.010.0 8.0 6.0 4.0 2.0 0.0 2010 TR © IPD Mar-11 www.ipd.com
  • 15. Three years: Residential vs Other assets On the pulse of the property worldInvestment Performance by asset class, % TR pa. Residential Market lets All Commercial Property 8.0 Gilts Equities 6.0 Retail Office 4.0 Industrial 2.0 0.0 -2.0 -4.0 3 yr annualised TR www.ipd.com © IPD Mar-11
  • 16. Five years: Residential vs Other assets On the pulse of the property worldInvestment Performance by asset class, % TR pa. Residential Market lets All Commercial Property 8.0 Gilts Equities Retail 6.0 Office Industrial 4.0 2.0 0.0 5 yr annualised TR www.ipd.com © IPD Mar-11
  • 17. Ten years: Residential vs Other assets On the pulse of the property worldInvestment Performance by asset class, % TR pa. Residential Market lets All Commercial Property 12.0 Gilts Equities 10.0 Retail Office 8.0 Industrial 6.0 4.0 2.0 0.0 10 yr annualised TR www.ipd.com © IPD Mar-11
  • 18. Residential top sector for rental On the pulse of value growth year after year the property worldERV growth indices for resi & commercial sectors140 The chart plots the growth of rental values in the IPD130 residential index against the same120 measure for commercial sectors.110100 90 80 Residential ML All commercial Property Retail Office Industrial www.ipd.com © IPD Mar-11
  • 19. Voids On the pulse of the property worldRent not demanded / gross rent Residential Commercial 12.00 10.00 8.00 6.00 4.00 2.00 0.00 2008 2009 2010 www.ipd.com © IPD
  • 20. Discount to VPV (Premium) On the pulse of the property worldVacant possession value compared to investment value Residential Market Lets 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 www.ipd.com © IPD
  • 21. Inflation and riskCan Investors hedge their bets withResidential? On the pulse of the property world
  • 22. Real investment return: Residential vsOther asset classes On the pulse of the property worldRPI adjusted annualised Total return; current, medium & long term Residential Market lets All commercial property Gilts Equities 10.0 8.0 6.0 4.0 2.0 0.0 -2.0 -4.0 -6.0 2010 3 years 5 years 10 years www.ipd.com © IPD Mar-11
  • 23. Residential: Real Long term value On the pulse of the property worldAll commercial real Total return & Capital growth vsResi real Total Return and capital growth, 2000 = 100 200 150 100 50 2000 2002 2004 2006 2008 2010 Residential market let real capital growth Commercial real capital growth Residential market let real total Rrturn Commercial property real total returnSource: IPD www.ipd.com © IPD Mar-11
  • 24. Risk reward spectrum On the pulse of10 year total return vs standard deviation the property world 12.0 Market Let Residential 10.0 8.0 Retail Total Return All Commercial Industrial Office Gilts 6.0 Equities 4.0 2.0 0.0 Risk 22.0 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 www.ipd.com © IPD Mar-11
  • 25. Reward for your risk On the pulse of the property world10 Yr Sharpe Ratio; Risk premium / Total risk Residential Market lets All Commercial Property Equities 0.6 Retail Office Industrial 0.5 0.4 0.3 0.2 0.1 0.0 -0.1 -0.2 10 yr Sharpe ratio www.ipd.com © IPD Mar-11
  • 26. Income analysisTrue income performance comparison On the pulse of the property world
  • 27. Ten year Income Performance On the pulse ofTen year standing investment income return; Residential vs the property worldcommercial with capital growth factor removed Residential market let All commercial property Residential subject to commercial CG 8 7 6 5 4 3 2 www.ipd.com © IPD
  • 28. Net income % after operatingcosts On the pulse of the property worldCommercial figures exclude voids, % net income figures atDecember 2010 Residential Commercial 100.00 90.00 80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 2008 2009 2010 www.ipd.com © IPD
  • 29. True Gross to net comparison On the pulse of the property worldGross Income includes “rent not demanded” and rent freefigures at December 2010 Residential Commercial 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 2008 2009 2010 www.ipd.com © IPD
  • 30. On the pulse ofConclusions the property world • 2010 has seen another year of strong performance by residential market let property. Central London has driven the market with the regions lagging according to their geographical distance form the capital. • Residential market let investment has consistently rewarded investors with greater returns than commercial property and other asset classes since 2000 despite lower income yields. The resi market has only delivered a negative total once during the decade (2008), all other assets classes were two or more. • The long term real performance of residential represents a hedge against inflation with a relative lack of volatility delivering an enviable risk reward ratio. This whilst still maintaining impressive performance relative to other assets classes. • True residential income performance is devalued by it’s superior capital growth and a focus on annual yields. Cash returns to investment can match that of commercial with management efficiency more comparable than previously thought. www.ipd.com © IPD
  • 31. On the pulse ofThank you the property worldMark WeedonHead of UK Residential ServicesEmail: Mark.weedon@ipd.comIntellectual Property Rights and use of IPD statistics as benchmarksWhether in the public domain or otherwise, IPDs statistics are the intellectual property of Investment Property Databank Limited.It is not permissible to use data drawn from this presentation as benchmarks.© Investment Property Databank Limited (IPD) 2010. Database Right, Investment Property Databank Limited (IPD) 2010.All rights conferred by law of copyright and by virtue of international conventions are reserved by IPD www.ipd.com © IPD Mar-11
  • 32. Reflections on ReturnsTrevor Moross Dorrington On the pulse of the property world
  • 33. On the pulse of the property worldwww.ipd.com © IPD
  • 34. Panel Discussion with:Alan Collett AllsopAlan Patterson AXA REIMNeil Young Young Group On the pulse of the property world
  • 35. Voting Questions On the pulse of the property world
  • 36. With which activities within the UK property On the pulse ofindustry is your organization involved? the property world(please select all the relevant options) 144 1 - Agency / Surveying 2 - Asset management 3 - Construction / development 4 - Financial / lending 5 - Fund/portfolio Investment and/or management (commercial) 6 - Fund/portfolio Investment and/or management (residential) 7 - Legal 8 - Research 9 - Other www.ipd.com © IPD
  • 37. With which activities within the UK property On the pulse ofindustry is your organization involved? the property world(please select all the relevant options) 1 - Agency / Surveying 27% 2 - Asset management 14% 3 - Construction / development 3% 4 - Financial / lending 6% 5 - Fund/portfolio Investment and/or 13% management (commercial) 19% 6 - Fund/portfolio Investment and/or management (residential) 3% 7 - Legal 10% 8 - Research 6% 9 - Other www.ipd.com © IPD
  • 38. What is the most significant obstacle whichhas prevented more meaningful investment On the pulse of the property worldby UK institutions into Residential property 126over the last few decades? 1. Insufficient availability of suitable stock 2. Perception of intensive asset management and low income yields 3. Difficulties in obtaining planning permission for suitable development 4. Lack of market knowledge/ management expertise 5. Prohibitive levels of tax and regulation 6. Unwillingness to break from the norm/take a risk 7. Other www.ipd.com © IPD
  • 39. What is the most significant obstacle whichhas prevented more meaningful investment On the pulse of the property worldby UK institutions into Residential propertyover the last few decades? 1. Insufficient availability of suitable 10% stock 2. Perception of intensive asset 57% management and low income yields 3. Difficulties in obtaining planning 3% permission for suitable development 6% 4. Lack of market knowledge/ management expertise 6% 5. Prohibitive levels of tax and regulation 14% 6. Unwillingness to break from the norm/take a risk 3% 7. Other www.ipd.com © IPD
  • 40. Which UK asset class will see the biggest On the pulse ofincrease in its share of institutional funds the property worldrelative to today in the next five years? 119 1. Bonds 2. Equities 3. Commercial property (Retail, Office, Industrial) 4. Residential property 5. Other niche property (Student, hotel, healthcare, leisure) www.ipd.com © IPD
  • 41. Which UK asset class will see the biggest On the pulse ofincrease in its share of institutional funds the property worldrelative to today in the next five years? 1. Bonds 10% 2. Equities 25% 3. Commercial property (Retail, Office, 10% Industrial) 19% 4. Residential property 35% 5. Other niche property (Student, hotel, healthcare, leisure) www.ipd.com © IPD
  • 42. Which UK asset class will see the biggest On the pulse ofdecrease in its share of institutional funds the property worldrelative to today in the next five years? 116 1. Bonds 2. Equities 3. Commercial property (Retail, Office, Industrial) 4. Residential property 5. Other niche property (Student, hotel, healthcare, leisure) www.ipd.com © IPD
  • 43. Which UK asset class will see the biggest On the pulse ofdecrease in its share of institutional funds the property worldrelative to today in the next five years? 1. Bonds 47% 2. Equities 24% 3. Commercial property (Retail, Office, 23% Industrial) 3% 4. Residential property 3% 5. Other niche property (Student, hotel, healthcare, leisure) www.ipd.com © IPD
  • 44. Audience Q&A On the pulse of the property world
  • 45. IPD European Residential InvestmentConference On the pulse of the property world9th June 2011, Sheraton Frankfurt Hotel &Towers, GermanyJoin IPD on 9th Junefor the EuropeanResidential InvestmentConference in Germany.www.ipd.com/europeanresidentialconf www.ipd.com © IPD