Lucian Cook's presentation on a Market Examination from RESI 2015 held at Celtic Manor.

1. LOGO
Lucian Cook
RESI Conference 2015, 8th September 2015, Celtic Manor
Market Examination

2. Understanding
the generation
divide

3. 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

4. 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

5. The housing
divide

6. The over 65s
+1.230mOverall
+1.358m
Ten year shifts in tenure
Un-mortgaged owner occupation
+1.2m
Source: English Housing Survey

7. The 35-44 year olds
-783kThe under 35s
-732k
Ten year shifts in tenure
Mortgaged owner occupation
-732k
Source: English Housing Survey

8. The under 35s
+1.137mOverall
+2.436m
Ten year shifts in tenure
Private renting
2,436,000
Source: English Housing Survey

9. The 45-64 year olds
+291kThe under 45s
-120k
Ten year shifts in tenure
Social housing
505,000
Source: English Housing Survey

10. 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

11. 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

12. 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

13. Policy
implications

14. 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.”

15. Policy tension
Help to Buy &
Starter Home Incentives
Mortgage
Market Review

16. 0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
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 15
0
40,000
80,000
120,000
160,000
200,000
240,000
Annualtransactions
AnnualStarts
Housing Transactions LHS All Housing Starts RHS Private Housing Starts RHS All Residential Permissions RHS
Is it working?
Is it working in England?
Source: HMRC, DCLG

17. A changing housing agenda
LOGO
An additional £175,000 inheritance tax
allowance for those leaving their home to their
children or grandchildren
11

18. A changing housing agenda
LOGO
22
Limiting tax relief of mortgage interest for buy to
let investors

19. A changing housing agenda
LOGO
33
Help to Buy and Starter Homes
Extension of Right to Buy

20. A changing housing agenda
LOGO
44
Reforming affordable rents

21. A changing housing agenda
LOGO
55
Ongoing reform to the planning system building
on the NPPF
5 year land supply
Local plans

22. 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

23. Retirement opportunities
Affluence
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

24. Buy to Let v First Time Buyers
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
ChangeinNumberofHouseholds
Increase in O/S mortgages BTL lending for HP
Estimated growth in PRS (EHS) Savills Estimate of Growth in PRS (UK)
Source: Savills, CLG, CML (English Housing Survey)

25. -
50,000
100,000
150,000
200,000
250,000
300,000
350,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
AxisTitle
Axis Title
Increase in O/S mortgages BTL lending for HP
Estimated growth in PRS Savills Estimate of Growth in PRS (UK)
Buy to Let v First Time Buyers
Source: 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

26. 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

27. Housing
delivery

28. Equity loan
Mortgage guarantee
Help to buy
27,414
In year to March 2015
47,018
In 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
46,877
In total
78%
To FTBs
5.4%
In London
£6.9bn
Has supported loans of
“capacity” of £130bn
Extended by £6bn to
2020

29. 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
£450k
in London
Max o/s London
FTB under the
age of
40
year restriction
on sale or
letting
5

30. 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

31. 2 x median income @ 3.5 LTI, median house price
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Residualfundingasa%ofpurchaseprice
below zero 0 - 20% 20% to 30% 30% plus
Source: Savills, ASHE, Land Reg

32. 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Residualfundingasa%ofpurchaseprice
below zero 0 - 20% 20% to 30% 30% plus
2 x median income @ 3.5 LTI, discounted house price
Source: Savills, ASHE, Land Reg

33. 1 x median income @ 4.5 LTI, discounted house price
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Residualfundingasa%ofpurchaseprice
below zero 0 - 20% 20% to 30% 30% plus
Source: Savills, ASHE, Land Reg

34. In conclusion

35. Conclusions

36. Thank you

37. 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
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