lucian cook, resi 2015, celtic manor
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LOGO
Lucian Cook
RESI Conference 2015, 8th September 2015, Celtic Manor
Market Examination
Understanding the generation
divide
The generational divide
LOGO
Maturist (pre 1945)
Formal Letter | Face to face meetings
Wartime rationing | Rock’n’roll | Nuclear Families | Gender roles
Jobs for life
Baby Boomers (1945 – 1960)
Telephone | Increasingly will go online
Cold war | Swinging Sixties | Moon Landings | Family oriented
Organisational: careers defined by employees
Generation X (1961 – 1980)
Email & Text | Online | Would prefer face to face
Fall of Berlin Wall | Thatcher / Regan | Live Aid | Divorce rate rises
Portfolio Careers (loyalty to profession, not employer)
Generation Y (1981-1995)
Text or social media | Face to face
9/11 | Social media | Reality TV | Google Earth
Digital entrepreneurs work ‘with’ organisations
Generation Z (post 1995)
Instagram | Snapchat | WhatsApp | Tinder
Economic downturn | Global warming | Wiki-leaks
Multitaskers
The housing divide
The over 65s
+1.230mOverall+1.358m
Ten year shifts in tenureUn-mortgaged owner occupation
+1.2m
Source: English Housing Survey
The 35-44 year olds
-783kThe under 35s-732k
Ten year shifts in tenureMortgaged owner occupation
-732k
Source: English Housing Survey
The under 35s
+1.137mOverall+2.436m
Ten year shifts in tenurePrivate renting
2,436,000
Source: English Housing Survey
The 45-64 year olds
+291kThe under 45s-120k
Ten year shifts in tenureSocial housing
505,000
Source: English Housing Survey
Enter text
LOGO
Housing Wealth
Occupiers housing equity £bn % of all equity
Equity as a % of value of occupied property
£125 4.7% 13.8%Under 35
35 - 49
50 - 64
Over 65
£493 18.5% 33.8%
£873 32.7% 66.5%
£1,179 44.2% 83.9%
Total £2,669 100.0% 52.6%
Age
Source: Savills research
Reflected in the annual housing cost
Over 65
50-64
35-49
Under 35
£2,000 £ 4,000 £ 6,000 £ 10,000 £ 12,000 £ 14,000 £ 16,000 £ 18,000£ 8,000
England & Wales London
57% in private rent 67% in private rent
Age
Source: Savills research
Some gross generalisations.....
Frustrated by lack of access to home ownership & social housing
Maturist (pre 1945)
Concerned by elderly housing provision
Baby Boomers(1945–1960)
Generally equity rich with low housing costs
Generation X(1961–1980)
Last on the ladder, extending as much as trading up
Generation Y(1981-1995)
Generation Z(post 1995)
Looking forward to living with their parents for many, many years to comeFears for housing
prospects of Gen Y & Z
Attracted by buy to let & pension freedom
Protective of asset value, reluctant to downsize, NIMBY
Concerned by interest rate rises
Despised by Gen Y
Obsess about costs of renting
Reliant on bank of Mum & Dad to get on or up the ladder, YIMBY
Source: Savills research
Policy implications
George Osborne 8th July 2015“Mr Deputy Speaker, another key to raising the productivity of our country is building more homes and creating a fairer property market. This is a government that is unwavering in its support for home ownership.”
Policy tension
Help to Buy & Starter Home Incentives
MortgageMarket Review
Q1 06 Q3 06 Q1 07 Q3 07 Q1 08 Q3 08 Q1 09 Q3 09 Q1 10 Q3 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 150
40,000
80,000
120,000
160,000
200,000
240,000
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
Housing Transactions LHS All Housing Starts RHSPrivate Housing Starts RHS All Residential Permissions RHS
Annu
al S
tarts
Annu
al tr
ansa
ctio
ns
Is it working?
Is it working in England?Source: HMRC, DCLG
A changing housing agenda
LOGO
An additional £175,000 inheritance tax allowance for those leaving their home to their
children or grandchildren
11
A changing housing agenda
LOGO
22
Limiting tax relief of mortgage interest for buy to let investors
A changing housing agenda
LOGO
33
Help to Buy and Starter Homes
Extension of Right to Buy
A changing housing agenda
LOGO
44
Reforming affordable rents
A changing housing agenda
LOGO
55
Ongoing reform to the planning system building on the NPPF
5 year land supply
Local plans
Inheritance tax
1.5% 3.14 million
0.7% 7%
of all sales in 2014 were for more than £1m home owners who own their property outright have at least 2 bedrooms per occupant
of estates notified for probate and a net value of £2m* of all sales are by downsizers
Source: HMRC, 2011 census, English Housing Survey
Retirement opportunities
Affl
uenc
e
Luxury care
Adapted home or housing association provision
Equity release? Private care home
Assisted living and retirement
villages
Assisted living and retirement
villages
State funded care home
High quality new build
Level of care
Buy to Let v First Time Buyers
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 -
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Increase in O/S mortgages BTL lending for HP Estimated growth in PRS (EHS)Savills Estimate of Growth in PRS (UK)
Cha
nge
in N
umbe
r of
Hou
seho
lds
Source: Savills, CLG, CML (English Housing Survey)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 -
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Increase in O/S mortgages BTL lending for HP Estimated growth in PRS Savills Estimate of Growth in PRS (UK)
Axis Title
Axi
s Ti
tle
Buy to Let v First Time BuyersSource: Savills, CLG, CML (English Housing Survey)
30%
of all private rented stock subject to a buy to let mortgage
54%
the average LTV on properties subject to a buy to let mortgage
LOGO
Pre budget 2020-21
5.25%
Capital value
Mortgage
Interest rate
Gross rental income £12,900£9,670£5,802
Net surplus £949
Net of running costs
-£6,067£1,213
£115,500£255,300
3.25%£10,700£8,025£4,815
£2,562
-£3,756£1,502
£115,500£214,000
Net of tax at say 40%
Mortgage finance
Tax relief
Restricting mortgage relief
Rationalisation of portfolios
Less ability to expand
Search for higher yield
Avoiding markets dependent on housing benefit
Source: PLEASE ADD
Housing delivery
Equity loan
Mortgage guarantee
Help to buy
27,414
In year to March 2015
47,018In total
82%To FTBs
5.5% In London £1.99bn
Of loans granted out of £3.5bn originally available
39,578
In year to March 2015
46,877In total
78%To FTBs
5.4% In London
£6.9bnHas supported loans of
“capacity” of £130bn
Extended by £6bn to
2020
Release from CIL & s106 affordable housing contributions
No longer to be restricted to underused or unviable industrial & commercial land
Intended to be windfall delivery?
Starter homes
discount to market value
20%Minimum
and £250k £450kin London
Max o/s London
FTB under the age of
40year restriction
on sale or letting
5
What on earth is he going to do next?
Looked at the median income of all employees
Multiplied it by 2 to assume 2 earners
Assumed a 3.5 loan to income mortgage
Compared that to the median house price
Income multiplier < median house price = green
Within 20% = amber
Within 20% and 30% = light red
Less than 70% = dark red
2 x median income @ 3.5 LTI, median house price
Lond
on
South
East
South
Wes
tEas
t
Wes
t Mids
East M
ids
Wale
sY &
H
North W
est
North E
ast
Scotla
nd0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
below zero 0 - 20% 20% to 30% 30% plus
Res
idua
l fun
ding
as
a %
of p
urch
ase
pric
e
Source: Savills, ASHE, Land Reg
Lond
on
South
East
South
Wes
tEas
t
Wes
t Mids
East M
ids
Wale
sY &
H
North W
est
North E
ast
Scotla
nd0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
below zero 0 - 20% 20% to 30% 30% plus
Res
idua
l fun
ding
as
a %
of p
urch
ase
pric
e
2 x median income @ 3.5 LTI, discounted house priceSource: Savills, ASHE, Land Reg
1 x median income @ 4.5 LTI, discounted house price
Lond
on
South
East
South
Wes
tEas
t
Wes
t Mids
East M
ids
Wale
sY &
H
North W
est
North E
ast
Scotla
nd0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
below zero 0 - 20% 20% to 30% 30% plus
Res
idua
l fun
ding
as
a %
of p
urch
ase
pric
e
Source: Savills, ASHE, Land Reg
In conclusion
Conclusions
Thank you
Please note this presentation is for general informative purposes only. While every effort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research.
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