IPD Investment Income return; Residential vs Commercial

Residential investment can deliver:Exploding the mythsRESI 2010, Celtic Manor, 16-09-2010 “Residential property consistently offers investors significantly lower income performance than commercial” Myth or Fact? IPD Residential research, UK Residential service sponsored by: www.ipd.com © IPD

Residential property Performance Total return, Six months to June 2010 Income Return Capital Growth Total Return 12 10 9.6 8 3.2 6 4.7 4 2.5 6.2 2 2.2 0 Residential market let Commercial property www.ipd.com © IPD

Long Term Income PerformanceMarket Let Residential vs commercial property, June2001 - June 2010 Relative Residential market let All commercial property 15 13 11 9 7 6.2 6.2 5.8 5 4.7 4.2 4.1 3 1 -1 -1.0 -1.3 -0.8 -1.3 -1.8 -1.6 -1.4 -3 -2.3 -2.1 -2.4 -1.9 -2.5 -5 02 03 04 05 06 07 08 09 10 ed ed ed is is is n n n n n n n n n Ju Ju Ju Ju Ju Ju Ju Ju Ju al al al nu nu nu an an an s s s yr yr yr 3 5 9 www.ipd.com © IPD

Long Term Capital GrowthMarket Let Residential vs commercial property,June 2001 - June 2010 Relative Residential market let All commercial property 30 28.7 20 17.0 15.7 11.6 9.9 10 5.9 4.7 6.2 1.5 1.7 0.9 0.3 0 -3.8 -3.6 -10 -5.3 -6.7 -12.4 -10.9 -20 -30 -40 ed ed ed 02 03 04 05 06 07 08 09 10 is is is n n n n n n n n n al al al Ju Ju Ju Ju Ju Ju Ju Ju Ju nu nu nu an an an s s s yr yr yr 3 5 9 www.ipd.com © IPD

Long Term Total returnMarket Let Residential vs commercial property, June2001 - June 2010 Relative Residential market let All commercial property 30 25.8 20 15.8 14.1 10 8.9 7.7 11.2 5.1 6.5 0.9 3.0 4.4 0.3 2.0 0 -1.0 -6.9 -10 -7.0 -7.9 -12.9 -20 -30 d d ed 02 03 04 05 06 07 08 09 10 e e lis lis is n n n n n n n n n al ua ua Ju Ju Ju Ju Ju Ju Ju Ju Ju nu n n an an an s s s yr yr yr 3 5 9 www.ipd.com © IPD

What this new dataset tells us? • Property company management expertise capable of achieving income returns which are closer to commercial levels. The 9 yr relative return of - 1.4% annually compares favourably to the -2.2% relative return for the full annual dataset to December 2009 • Extra income return does not come at a cost of total return, in fact it’s improved to +4.4% above all commercial annually over 9 years (full dataset achieved +4% annually to Dec 09). • Capital growth of residential greatly exceeds commercial (5.9% annually over 9 years). • Wouldn’t this affect the income return over time? www.ipd.com © IPD

Three year Income PerformanceThree year Standing investment income return; Residentialvs commercial With capital growth factor removed Relative Residential market let All commercial property Residential subject to commercial CG 8 7 6 6.2 5.4 5 4 4.1 3 2 1 0 -0.2 -1 -0.8 -1.1 -1.1 -2 Jun 08 Jun 09 Jun 10 3 yrs annualised www.ipd.com © IPD

Five year Income PerformanceFive year Standing investment income return; Residentialvs commercial With capital growth factor removed Relative Residential market let All commercial property Residential subject to commercial CG 8 6 5.8 4.4 4 4.1 2 0 -1.0 -0.8 -1.1 -1.3 -2 -1.5 -1.9 -4 Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 5 yrs annualised www.ipd.com © IPD

Nine year Income PerformanceNine year standing investment income return; Residentialvs commercial with capital growth factor removed Relative Residential market let All commercial property Residential subject to commercial CG 8 7 6 6.2 6.1 5 4.5 4 3 2 1 0.4 0.6 0.6 0.0 0.1 0 0.0 -0.1 -1 -0.6 -0.5 -2 -1.2 02 03 04 05 06 07 08 09 10 ed n n n n n n n n n is Ju Ju Ju Ju Ju Ju Ju Ju Ju al nu an s yr 9 www.ipd.com © IPD

Conclusions • Expert fund and property management of residential can deliver decent annual income returns and impressive annual total returns, especially relative to commercial. • Residential income performance relative to commercial is significantly devalued by it’s superior capital growth. • Over the long term, residential property can deliver similar net income receivable as a percentage of original outlay to commercial for an equivalent sum invested in both. At the same time it offers a far greater total return. www.ipd.com © IPD

Residential investment can deliver:Exploding the myths “Residential property consistently offers investors significantly lower income performance than commercial” Myth!!! Mark Weedon, Head of UK Residential Services, IPD www.ipd.com © IPD

IPD Investment Income return; Residential vs Commercial

by Inspired Asset Management on Jan 20, 2011

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IPD Investment Income return; Residential vs Commercial — Presentation Transcript