2010 ipd residential index results presentation
DESCRIPTION
The Results of the 2010 IPD UK Residential Index. Some very interesting insights inside so do check it out.TRANSCRIPT
IPD 2010 UK Residential
Index Launch
On the pulse of the property world
Index Launch
Wednesday 16th March 2011One Moorgate Place, London
Welcome
On the pulse of the property worldPhil Tily, Managing Director of UK &
Ireland, IPD
On the pulse of the property worldProgramme
09.00 Chair welcome and introductionSue Foxley, Cluttons
09.10 UK Residential index results and 10 year performance comparisonMark Weedon, IPD
09.35 Reflections on Returns
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09.35 Reflections on Returns Trevor Moross, Dorrington
09.50 Panel discussionAlan Collett, AllsopAlan Patterson, AXA REIMNeil Young, Young GroupVoting questionsQ&A from audience
10.30 Launch Close
IPD Residential Index
Launch
On the pulse of the property world
Residential investment, The Decade
Mark Weedon, IPD
On the pulse of the property world
Overview
Database Contributors
Annington Homes Grainger plc
Cadogan Estates Grosvenor Estates
Cordea Savills LLP Grosvenor Fund Management
The Church Commissioners Invista REIM
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The Church Commissioners Invista REIM
The Crown Estate Martin’s Properties
Dorrington plc South Kensington Estates
D&G Investment Management Terrace Hill Group plc
Evenbrook Unite Group
Genesis homes
On the pulse of the property world
Sponsors
Residential Overview
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On the pulse of the property world
2.392.26 2.28
2.48
3
Residential Investment Market
Market Let Properties Other Residential Leases*
Investment value at year end, £m
Size of IPD residential databank, end 2010 Size of residential market let index,2001-2010 (£B)
© IPDwww.ipd.com Mar-11
0.75
1.261.41
1.561.72 1.77
0
1
2
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
£2.48bn£1.85bn
£4.33bn
•These non-market let units are excluded from the IPD residential index but are available for analysis as part of IPD's residential benchmarking service.
7597 PROPERTIES
Residential Market
performance
On the pulse of the property world
Market Let standing investments and other
asset classes, 2000-2010
On the pulse of the property world
Residential investment performance
2010Total return, Income return and capital growth
10.4
8.0
10.0
12.0Income Return Capital Growth Total Return
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2.8
7.4
0.0
2.0
4.0
6.0
All Residential Market lets
%
On the pulse of the property world
Regional investment performance 2010
Total return, Income return and capital growth
5.0
10.0
15.0
%
Income Return Capital Growth Total Return
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-10.0
-5.0
0.0
%
On the pulse of the property world
Regional investment performance 3 yrs
Total return, Income return and capital growth
-2.0
0.0
2.0
4.0
6.0
%
Income Return Capital Growth Total Return
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-10.0
-8.0
-6.0
-4.0
-2.0%
On the pulse of the property world
Regional investment performance: 5 yrs
Total return, Income return and capital growth
3.0
5.0
7.0
9.0
11.0
%
Income Return Capital Growth Total Return
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-5.0
-3.0
-1.0
1.0
3.0%
On the pulse of the property world
Regional investment performance: 10 yrs
Total return, Income return and capital growth
6.0
8.0
10.0
%
Income Return Capital Growth Total Return
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0.0
2.0
4.0
6.0%
On the pulse of the property world
14.0
16.0
18.0
Residential Market lets All Commercial PropertyGilts EquitiesRetail OfficeIndustrial
2010 Residential vs Other assets
Investment Performance by asset class, % TR pa.
© IPDwww.ipd.com Mar-11
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2010 TR
On the pulse of the property world
6.0
8.0
Residential Market lets
All Commercial Property
Gilts
Equities
Retail
Office
Three years: Residential vs Other assets
Investment Performance by asset class, % TR pa.
© IPDwww.ipd.com Mar-11
-4.0
-2.0
0.0
2.0
4.0
3 yr annualised TR
Office
Industrial
On the pulse of the property world
6.0
8.0
Residential Market lets
All Commercial Property
Gilts
Equities
Retail
Office
Five years: Residential vs Other assets
Investment Performance by asset class, % TR pa.
© IPDwww.ipd.com Mar-11
0.0
2.0
4.0
6.0
5 yr annualised TR
Office
Industrial
On the pulse of the property world
10.0
12.0
Residential Market lets
All Commercial PropertyGiltsEquitiesRetailOffice
Ten years: Residential vs Other assets
Investment Performance by asset class, % TR pa.
© IPDwww.ipd.com Mar-11
0.0
2.0
4.0
6.0
8.0
10 yr annualised TR
OfficeIndustrial
On the pulse of the property world
120
130
140
Residential top sector for rental
value growth year after year
The chart plots the growth of rental values in the IPD residential index against the same measure for commercial sectors.
ERV growth indices for resi & commercial sectors
© IPDwww.ipd.com Mar-11
80
90
100
110
Residential ML All commercial Property Retail Office Industrial
On the pulse of the property world
Voids
10.00
12.00
Residential Commercial
Rent not demanded / gross rent
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0.00
2.00
4.00
6.00
8.00
2008 2009 2010
On the pulse of the property world
Discount to VPV (Premium)
12.00
14.00
16.00
18.00
Residential Market Lets
Vacant possession value compared to investment value
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0.00
2.00
4.00
6.00
8.00
10.00
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Inflation and risk
On the pulse of the property world
Can Investors hedge their bets with
Residential?
On the pulse of the property world
Real investment return: Residential vs
Other asset classes
RPI adjusted annualised Total return; current, medium & long term
4.0
6.0
8.0
10.0
Residential Market lets All commercial property Gilts Equities
© IPDwww.ipd.com Mar-11
-6.0
-4.0
-2.0
0.0
2.0
4.0
2010 3 years 5 years 10 years
On the pulse of the property world
150
200
Residential: Real Long term value
All commercial real Total return & Capital growth vs Resi real Total Return and capital growth, 2000 = 100
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50
100
150
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 return
Source: IPD
On the pulse of the property world
Risk reward spectrum
Retail
Market Let Residential
All Commercial
8.0
10.0
12.0
To
tal R
etu
rn
10 year total return vs standard deviation
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Office
Industrial
All Commercial
Equities
Gilts
0.0
2.0
4.0
6.0
4.06.08.010.012.014.016.018.020.022.0
To
tal R
etu
rn
Risk
On the pulse of the property world
0.4
0.5
0.6
Residential Market lets All Commercial Property Equities
Retail Office Industrial
Reward for your risk
10 Yr Sharpe Ratio; Risk premium / Total risk
© IPDwww.ipd.com Mar-11
-0.2
-0.1
0.0
0.1
0.2
0.3
10 yr Sharpe ratio
Income analysis
On the pulse of the property world
Income analysis
True income performance comparison
On the pulse of the property world
Ten year Income Performance
6
7
8
Residential market let All commercial property Residential subject to commercial CG
Ten year standing investment income return; Residential vs commercial with capital growth factor removed
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2
3
4
5
On the pulse of the property world
Net income % after operating
costs
70.00
80.00
90.00
100.00
Residential Commercial
Commercial figures exclude voids, % net income figures at December 2010
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0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
2008 2009 2010
On the pulse of the property world
True Gross to net comparison
70.0
80.0
90.0
Residential Commercial
Gross Income includes “rent not demanded” and rent free figures at December 2010
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0.0
10.0
20.0
30.0
40.0
50.0
60.0
2008 2009 2010
On the pulse of the property worldConclusions
• 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
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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.
On the pulse of the property worldThank you
Mark Weedon
© IPDwww.ipd.com Mar-11
Intellectual Property Rights and use of IPD statistics as benchmarksWhether in the public domain or otherwise, IPD's 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
Mark Weedon
Head of UK Residential Services
Email: [email protected]
Reflections on Returns
On the pulse of the property world
Trevor Moross Dorrington
On the pulse of the property world
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Alan Collett Allsop
Panel Discussion with:
On the pulse of the property world
Alan Collett AllsopAlan Patterson AXA REIMNeil Young Young Group
Voting Questions
On the pulse of the property world
On the pulse of the property world
With which activities within the UK property
industry is your organization involved?
(please select all the relevant options) 144
1 - Agency / Surveying
2 - Asset management
3 - Construction / development
4 - Financial / lending
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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
On the pulse of the property world
With which activities within the UK property
industry is your organization involved?
(please select all the relevant options)
1 - Agency / Surveying
2 - Asset management
3 - Construction / development
4 - Financial / lending
27%
14%
3%
6%
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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
6%
13%
19%
3%
10%
6%
On the pulse of the property world
What is the most significant obstacle which
has prevented more meaningful investment
by UK institutions into Residential property
over the last few decades?126
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
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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
On the pulse of the property world
What is the most significant obstacle which
has prevented more meaningful investment
by UK institutions into Residential property
over the last few decades?
1. Insufficient availability of suitable stock2. Perception of intensive asset management and low income yields
3. Difficulties in obtaining planning permission for suitable development
10%
57%
3%
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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
6%
6%
14%
3%
On the pulse of the property world
Which UK asset class will see the biggest
increase in its share of institutional funds relative to today in the next five years? 119
1. Bonds
2. Equities
3. Commercial property (Retail, Office, Industrial)
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4. Residential property
5. Other niche property (Student, hotel, healthcare, leisure)
On the pulse of the property world
Which UK asset class will see the biggest
increase in its share of institutional funds relative to today in the next five years?
1. Bonds
2. Equities
3. Commercial property (Retail, Office, Industrial)
10%
25%
10%
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Industrial)
4. Residential property
5. Other niche property (Student, hotel, healthcare, leisure)
19%
35%
On the pulse of the property world
Which UK asset class will see the biggest
decrease in its share of institutional funds relative to today in the next five years? 116
1. Bonds
2. Equities
3. Commercial property (Retail, Office, Industrial)
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4. Residential property
5. Other niche property (Student, hotel, healthcare, leisure)
On the pulse of the property world
Which UK asset class will see the biggest
decrease in its share of institutional funds relative to today in the next five years?
1. Bonds
2. Equities
3. Commercial property (Retail, Office, Industrial)
47%
24%
23%
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Industrial)
4. Residential property
5. Other niche property (Student, hotel, healthcare, leisure)
3%
3%
Audience Q&A
On the pulse of the property world
Audience Q&A
On the pulse of the property world
IPD European Residential Investment Conference 9th June 2011, Sheraton Frankfurt Hotel & Towers, Germany
Join IPD on 9th June for the European Residential Investment
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Residential Investment Conference in Germany.
www.ipd.com/europeanresidentialconf