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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
- 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
- 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
- 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
- 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
- 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
- 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
- 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