Housing 28 June 2012 Paul Winstanley Introduction Last - - PowerPoint PPT Presentation

Chartered Institute of Housing

28 June 2012 Paul Winstanley

Introduction

• Last presentation to CIH (in October 2011) – focus on what the PRS

is and why there is pressure for the sector to expand

• Today : An update on progress
• The Montague Review
• Allsop’s Montague Review Submission
• 2012 Budget, Stamp Duty and HMRC review
• REITS
• Residential PRS investment performance in 2011 (IPD)
• Conclusions

Previous Presentation

 The PRS is economically positive:

• Creates jobs
• Enables economic mobility within and to London
• Provides stability to families
• Housing more and more people

 The market let Residential sector has exceeded the returns of commercial property, gilts and equities over the past 5 and 10 years (according to IPD)  Much interest in residential investment but also many barriers to entry:

• Scale
• Reputational risk and management concerns
• Return profiles (in comparison to other assets)
• Availability of land
• Lack of translators and experts
• Structure

The Current State of Play

 Growing acknowledgement of the problem :- ‘Generation Rent’

• Joseph Rowntree – Housing Options for Young People

 Difficulty raising deposits  Government attention growing  Strong economic fundamentals remain

The Montague Review

 Began in February 2012 – submissions were submitted by 31 March 2012  Part of the Government’s Housing Strategy, asking:

• Will the changes that the Government has introduced go far

enough to generate significant new flows of investment?

• If not, what can be done to accelerate things?

 Panel of experts includes representatives from lobby groups, investors, managers and academics

The Montague Review - Allsop Submission/Recommendation

 Need to understand fundamentals of valuing residential assets  More a problem of representation than a problem with valuation methods themselves  Importance of ability to potentially access ‘vacant’ value at some point  A new ‘use class’ for PRS not necessary  An innovative solution needed

HMRC – Ensuring the fair taxation of residential property transactions

 The Budget 2012: Stamp Duty changes  ‘Non-natural’ (overseas) buyers to pay 15% SDLT on purchases of single residential dwellings over £2m  Consultation

• Specifically to consider the ‘annual charge’ proposed for

properties owned by companies and investment vehicles valued over £2m  Concerns  Timetable  Threats to PRS as things stand

Changes to Residential REIT legislation

 Finance Act 2012  Rules of REITS now relaxed  The new Buy to Let investment?  No REITS yet… but watch this space

Residential Investment Performance – 2011

 Housing starts still very low  Rents rose rapidly in 2011 – particularly in the capital  Total Returns from Residential Property again exceeded those of Commercial in 2011  Residential Market- lets included in the IPD ‘All Property Index’  Barriers remain to institutional investment

Conclusions

 Framework in place  Montague Review key- particularly for new build  New interest from overseas institutions  UK institutions also indicating interest  Importance of London and the South East  Stronger case than ever- but still need a pioneer