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.
