2010 IPD Residential Index Results Presentation
2 likes1,485 views
The document details the launch of the IPD 2010 UK Residential Index, highlighting market performance, investment returns, and regional analyses discussed during the event on March 16, 2011. It emphasizes that residential market investments have provided superior returns compared to commercial assets over the past decade, while addressing the challenges and perceptions surrounding residential property investment. Key insights include the resilience of residential returns against inflation and the need for improved market understanding among investors.
2010 IPD Residential Index Results Presentation
- 1. IPD 2010 UK Residential Index Launch On the pulse of Wednesday 16th March 2011 the property world One Moorgate Place, London
- 2. Welcome On the pulse of Phil Tily, Managing Director of UK & the property world Ireland, IPD
- 3. On the pulse of Programme the property world 09.00 Chair welcome and introduction Sue Foxley, Cluttons 09.10 UK Residential index results and 10 year performance comparison Mark Weedon, IPD 09.35 Reflections on Returns Trevor Moross, Dorrington 09.50 Panel discussion Alan Collett, Allsop Alan Patterson, AXA REIM Neil Young, Young Group Voting questions Q&A from audience 10.30 Launch Close www.ipd.com © IPD
- 4. IPD Residential Index Launch Residential investment, The Decade On the pulse of the property world Mark Weedon, IPD
- 5. Overview On the pulse of the property world Database Contributors Annington Homes Grainger plc Cadogan Estates Grosvenor Estates Cordea Savills LLP Grosvenor Fund Management 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 www.ipd.com © IPD
- 6. Residential Overview On the pulse of the property world Sponsors www.ipd.com © IPD
- 7. Residential Investment Market On the pulse of the property world Investment value at year end, £m Size of IPD residential databank, end 2010 Size of residential market let index, 2001-2010 (£B) Market Let Properties Other Residential Leases* 3 2.48 2.39 2.26 2.28 2 £2.48bn 1.72 1.77 £1.85bn 1.56 1.41 1.26 7597 PROPERTIES 1 0.75 0 £4.33bn 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 •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. © IPD Mar-11 www.ipd.com
- 8. Residential Market performance Market Let standing investments and other asset classes, 2000-2010 On the pulse of the property world
- 9. Residential investment performance On the pulse of 2010 the property world Total return, Income return and capital growth Income Return Capital Growth Total Return 12.0 10.4 10.0 8.0 7.4 % 6.0 4.0 2.0 2.8 0.0 All Residential Market lets www.ipd.com © IPD
- 10. Regional investment performance 2010 On the pulse of the property world Total return, Income return and capital growth 15.0 Income Return Capital Growth Total Return 10.0 5.0 % 0.0 -5.0 -10.0 www.ipd.com © IPD
- 11. Regional investment performance 3 yrs On the pulse of the property world Total return, Income return and capital growth 6.0 Income Return Capital Growth Total Return 4.0 2.0 0.0 %-2.0 -4.0 -6.0 -8.0 -10.0 www.ipd.com © IPD
- 12. Regional investment performance: 5 yrs On the pulse of the property world Total return, Income return and capital growth 11.0 Income Return Capital Growth Total Return 9.0 7.0 5.0 %3.0 1.0 -1.0 -3.0 -5.0 www.ipd.com © IPD
- 13. Regional investment performance: 10 yrs On the pulse of the property world Total return, Income return and capital growth Income Return Capital Growth Total Return 10.0 8.0 6.0 % 4.0 2.0 0.0 www.ipd.com © IPD
- 14. 2010 Residential vs Other assets On the pulse of the property world Investment Performance by asset class, % TR pa. Residential Market lets All Commercial Property Gilts Equities Retail Office 18.0 Industrial 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2010 TR © IPD Mar-11 www.ipd.com
- 15. Three years: Residential vs Other assets On the pulse of the property world Investment Performance by asset class, % TR pa. Residential Market lets All Commercial Property 8.0 Gilts Equities 6.0 Retail Office 4.0 Industrial 2.0 0.0 -2.0 -4.0 3 yr annualised TR www.ipd.com © IPD Mar-11
- 16. Five years: Residential vs Other assets On the pulse of the property world Investment Performance by asset class, % TR pa. Residential Market lets All Commercial Property 8.0 Gilts Equities Retail 6.0 Office Industrial 4.0 2.0 0.0 5 yr annualised TR www.ipd.com © IPD Mar-11
- 17. Ten years: Residential vs Other assets On the pulse of the property world Investment Performance by asset class, % TR pa. Residential Market lets All Commercial Property 12.0 Gilts Equities 10.0 Retail Office 8.0 Industrial 6.0 4.0 2.0 0.0 10 yr annualised TR www.ipd.com © IPD Mar-11
- 18. Residential top sector for rental On the pulse of value growth year after year the property world ERV growth indices for resi & commercial sectors 140 The chart plots the growth of rental values in the IPD 130 residential index against the same 120 measure for commercial sectors. 110 100 90 80 Residential ML All commercial Property Retail Office Industrial www.ipd.com © IPD Mar-11
- 19. Voids On the pulse of the property world Rent not demanded / gross rent Residential Commercial 12.00 10.00 8.00 6.00 4.00 2.00 0.00 2008 2009 2010 www.ipd.com © IPD
- 20. Discount to VPV (Premium) On the pulse of the property world Vacant possession value compared to investment value Residential Market Lets 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 www.ipd.com © IPD
- 21. Inflation and risk Can Investors hedge their bets with Residential? On the pulse of the property world
- 22. Real investment return: Residential vs Other asset classes On the pulse of the property world RPI adjusted annualised Total return; current, medium & long term Residential Market lets All commercial property Gilts Equities 10.0 8.0 6.0 4.0 2.0 0.0 -2.0 -4.0 -6.0 2010 3 years 5 years 10 years www.ipd.com © IPD Mar-11
- 23. Residential: Real Long term value On the pulse of the property world All commercial real Total return & Capital growth vs Resi real Total Return and capital growth, 2000 = 100 200 150 100 50 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 www.ipd.com © IPD Mar-11
- 24. Risk reward spectrum On the pulse of 10 year total return vs standard deviation the property world 12.0 Market Let Residential 10.0 8.0 Retail Total Return All Commercial Industrial Office Gilts 6.0 Equities 4.0 2.0 0.0 Risk 22.0 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 www.ipd.com © IPD Mar-11
- 25. Reward for your risk On the pulse of the property world 10 Yr Sharpe Ratio; Risk premium / Total risk Residential Market lets All Commercial Property Equities 0.6 Retail Office Industrial 0.5 0.4 0.3 0.2 0.1 0.0 -0.1 -0.2 10 yr Sharpe ratio www.ipd.com © IPD Mar-11
- 26. Income analysis True income performance comparison On the pulse of the property world
- 27. Ten year Income Performance On the pulse of Ten year standing investment income return; Residential vs the property world commercial with capital growth factor removed Residential market let All commercial property Residential subject to commercial CG 8 7 6 5 4 3 2 www.ipd.com © IPD
- 28. Net income % after operating costs On the pulse of the property world Commercial figures exclude voids, % net income figures at December 2010 Residential Commercial 100.00 90.00 80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 2008 2009 2010 www.ipd.com © IPD
- 29. True Gross to net comparison On the pulse of the property world Gross Income includes “rent not demanded” and rent free figures at December 2010 Residential Commercial 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 2008 2009 2010 www.ipd.com © IPD
- 30. On the pulse of Conclusions the property world • 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 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. www.ipd.com © IPD
- 31. On the pulse of Thank you the property world Mark Weedon Head of UK Residential Services Email: Mark.weedon@ipd.com Intellectual Property Rights and use of IPD statistics as benchmarks Whether 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 www.ipd.com © IPD Mar-11
- 32. Reflections on Returns Trevor Moross Dorrington On the pulse of the property world
- 33. On the pulse of the property world www.ipd.com © IPD
- 34. Panel Discussion with: Alan Collett Allsop Alan Patterson AXA REIM Neil Young Young Group On the pulse of the property world
- 35. Voting Questions On the pulse of the property world
- 36. With which activities within the UK property On the pulse of industry is your organization involved? the property world (please select all the relevant options) 144 1 - Agency / Surveying 2 - Asset management 3 - Construction / development 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 www.ipd.com © IPD
- 37. With which activities within the UK property On the pulse of industry is your organization involved? the property world (please select all the relevant options) 1 - Agency / Surveying 27% 2 - Asset management 14% 3 - Construction / development 3% 4 - Financial / lending 6% 5 - Fund/portfolio Investment and/or 13% management (commercial) 19% 6 - Fund/portfolio Investment and/or management (residential) 3% 7 - Legal 10% 8 - Research 6% 9 - Other www.ipd.com © IPD
- 38. What is the most significant obstacle which has prevented more meaningful investment On the pulse of the property world by UK institutions into Residential property 126 over the last few decades? 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 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 www.ipd.com © IPD
- 39. What is the most significant obstacle which has prevented more meaningful investment On the pulse of the property world by UK institutions into Residential property over the last few decades? 1. Insufficient availability of suitable 10% stock 2. Perception of intensive asset 57% management and low income yields 3. Difficulties in obtaining planning 3% permission for suitable development 6% 4. Lack of market knowledge/ management expertise 6% 5. Prohibitive levels of tax and regulation 14% 6. Unwillingness to break from the norm/take a risk 3% 7. Other www.ipd.com © IPD
- 40. Which UK asset class will see the biggest On the pulse of increase in its share of institutional funds the property world relative to today in the next five years? 119 1. Bonds 2. Equities 3. Commercial property (Retail, Office, Industrial) 4. Residential property 5. Other niche property (Student, hotel, healthcare, leisure) www.ipd.com © IPD
- 41. Which UK asset class will see the biggest On the pulse of increase in its share of institutional funds the property world relative to today in the next five years? 1. Bonds 10% 2. Equities 25% 3. Commercial property (Retail, Office, 10% Industrial) 19% 4. Residential property 35% 5. Other niche property (Student, hotel, healthcare, leisure) www.ipd.com © IPD
- 42. Which UK asset class will see the biggest On the pulse of decrease in its share of institutional funds the property world relative to today in the next five years? 116 1. Bonds 2. Equities 3. Commercial property (Retail, Office, Industrial) 4. Residential property 5. Other niche property (Student, hotel, healthcare, leisure) www.ipd.com © IPD
- 43. Which UK asset class will see the biggest On the pulse of decrease in its share of institutional funds the property world relative to today in the next five years? 1. Bonds 47% 2. Equities 24% 3. Commercial property (Retail, Office, 23% Industrial) 3% 4. Residential property 3% 5. Other niche property (Student, hotel, healthcare, leisure) www.ipd.com © IPD
- 44. Audience Q&A On the pulse of the property world
- 45. IPD European Residential Investment Conference On the pulse of the property world 9th June 2011, Sheraton Frankfurt Hotel & Towers, Germany Join IPD on 9th June for the European Residential Investment Conference in Germany. www.ipd.com/europeanresidentialconf www.ipd.com © IPD