into 20/20: Perfect Vision or Blurred Uncertainty? Spring Spring - - PowerPoint PPT Presentation

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into 20/20: Perfect Vision or Blurred Uncertainty? Spring Spring - - PowerPoint PPT Presentation

Jun 18, 2023 157 likes •584 views

Property Markets into 20/20: Perfect Vision or Blurred Uncertainty? Spring Spring 2019 Dr Angus McIntosh 2019 Real Estate Forecasting Limited UK Rental Value Growth, %pa 2014-2018 Industrial & Logistics fastest growth ? Source: Real

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Real Estate Forecasting Limited

Property Markets into 20/20: Perfect Vision or Blurred Uncertainty?

Spring Spring 2019

Dr Angus McIntosh 2019

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Real Estate Forecasting Limited

UK Rental Value Growth, %pa 2014-2018

Industrial & Logistics fastest growth

Source: Real Estate Forecasting: End 2018

?

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Three main issues

Economic policy & political challenges Climate Change & extreme weather events Technology Driven Authoritarianism

(Big Brother is Watching You, but who controls big brother?)

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Property Markets into 20/20:

Perfect Vision or Blurred Uncertainty?

Economics: the “dismal” science Keynes & after Planet earth: measuring the pollution of buildings Where we live? Buying goods, and food & beverage Industry, logistics & robots Offices & bots Invest: to stick or twist?

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Economic growth 2013-2019

UK GDP growth now below USA & EU

  • ne of worst in G7 & G20 countries.

Its not just BREXIT which has caused this.

Source: The Economist & IMF Spring 2019

UK

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Unemployment amazingly low – more part-time, self “gig”

employment, internships, zero hours. Fewer PAYE = lower taxes. Property taxation unlikely to fall; Government needs to income.

Source: BBC March 2019

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Productivity one of lowest in Europe –

people are cheap; investment risky & costly.

Public AND Private long-term investment - extremely low.

Source: BBC March 2019

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Real wages now rising faster than Inflation

but still much lower than in 2008, impact on retail spending and retail property

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UK Budget Deficit:% 2016 & 2019

EU Maastricht Treaty target - 3% Euro Area USA UK China

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Long Term Government Debt BUT Private Debt much higher

UK 2008 (was below 60%) & now in 2019 (was over 100%) EU Maastricht Treaty target 60%

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BREXIT

  • We want to be EITHER “Just In or Just Out” …….
  • Most voters & MPs did not know leaving the EU (Article 50)

was the same as leaving the EEA (European Economic Area – Single Market)

  • 70% of sitting MPs are against leaving the EU

Anthony Hilton, Evening Standard …..BEFORE REFERENDUM! Hindered Economic Growth & Held Back Interest Rate Rises London’s finance centre will NOT move to EU, but go to New York or Singapore

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Global Economy

  • IMF reform “ignored” 10 years after Lehman Bros, worry over world Debt.
  • German economy slowest growth in 5 years and Italian budget now more

in-line with EU request.

  • USA & China - Abandon Trade arrangements slowing down world

economic output…..“Global Trade Chaos” FT

  • Trump & the Big Wall “playing with fire” Hamish McRae, Evening Standard
  • Interest rates rising? – USA, UK, EU ? Turkey, Argentina, Italy…..
  • Technology - FANGS (Facebook, Amazon, Netflix, Google) need a review?

Tim-Berners Lee 30 years on. Regulate? News Corp. (Rupert Murdock) claims they have too much monopoly power !

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The Global Economy

  • Reduced influence of the United Nations.
  • Reduced power of International Criminal Court.
  • Restricted expenditure on the North Atlantic Treaty Organization
  • USA not signed the Paris Climate Change Protocol
  • Gold prices are up …………… reflecting Global Instability
  • Nationalism has impact on Freedom, Free Speech, Democracy &

LOWER ECONOMIC OUTPUT

  • “we must prepare now for the likelihood of a recession”

Lawrence Summers, former US Treasury secretary

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Back to a Keynesian economy OR more Monetary Policy?

  • How do we get “Better Scandinavia quality public services, with an American low

taxation & an expanded private sector”? Paul Johnson –Economist @ IFS

  • “40 year experiment not working …….. Controlling economy via Central Banks & Interest

Rates ” Martin Wolf FT

  • Public debt almost under control, but Private debt out of control – an all time high.
  • Privatization very mixed success – EG: Carillion, Public Housing deficit, Rail Franchising.
  • Following the Global Financial Crisis in 2008 - World Real Interest Rates now NEGATIVE

………………… have been been falling steadily since 1980s.

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Back to a Keynesian economy OR more Monetary Policy?

NEW IDEAS

Modern Monetary Policy

  • Not worry about budget deficits
  • Finance Ministries (Governments) should take more control
  • Not UN but UNDER-employment more important
  • Use Regulations, Controls & Taxation ….

to encourage long-term investment.

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UNIVERSITIES Bolton, Bradford, Chester, Durham, Huddersfield, Hull, Keele, Lancaster, Leeds, Liverpool, Manchester, Newcastle, Salford, Stafford, York 300,000 migrated out. Shortage of qualified employees.

A “two speed” economy: why subsidized? Golden Diamond of the North v South East:

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Liverpool, Leeds & Manchester are in the lead!......... BUT when will HS2 arrive?

When will the train arrive into Liverpool? Railways are behind the “pacer” trains.

Question: Invest in Cross Rail 2 in congested South East OR Northern Rail system?

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Property Markets into 20/20:

Perfect Vision or Blurred Uncertainty?

Planet earth: measuring the pollution of buildings

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Climate Change:

In addition to BREAM, EPCs, DECs, MEES, ESOS and more ………. An example – how to prepare for 50mm of rain in 30 mins!

Property Markets into 20/20

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Property Markets into 20/20

(Most efficient Office: London West End wins)

Office Type Whole Life

  • Kg. CO2

Sq.M. GDP Per person Ratio CBD Central London Air-Con. 12,518K £4,500K 27 CBD Regional Air-Con. 10,758K £1,800K 57 Regional City NON Air-Con. 9,303K £1,260K 67 Out of Town Business Parks Air-Con. 13,674K £1,629K 75

BCO PROJECT:

Economic OFFICE

  • utput to the

whole-life carbon pollution

(including transport) footprint.

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Property Markets into 20/20

(Most efficient Retail : Rail stations win!)

REVO PROJECT:

Economic output (sales) to

whole-life carbon pollution

(including transport) footprint.

(nos. rounded up)

Retail Unit Total Whole Life Econ. Output Ratio A1/2Food Comb. Trans 70000 600000 8.5 A3 Combined Trans. 15600 72000 4.5 A1/2 Food Home Del. 61000 150000 2.4 A1/2 O of T Food 313000 600000 1.9 A1/2 Click & Coll. Food 350000 600000 1.7 WORST A1/2 High St Non-Food 1468000 480000 0.33 A1/2 Secondary H St. 379000 100000 0.26 A3 Out of Town 258000 60000 0.23 A1/2 High Street Food 1430000 300000 0.21 A3 High Street 1155000 72000 0.06

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Property Markets into 20/20:

Perfect Vision or Blurred Uncertainty?

Where we live?

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Property Markets into 20/20:

“ Wages, Home ownership, Pension Wealth and Old Age….” the four challenges for the “Millennials” The Daily Telegraph

“Housing outlook worst for 20 years” BBC/RICS

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Old wealthy folk Young poor folk - tenants

Age 18- 34 35-49 50-64 65+

% of Populatio n

28 25 24 23

% of Househol d wealth

6 19 33 43

House of Commons report “250,000 new homes pa to meet rising demand” 500,000 pa needed to make up 35 year back-log.

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Property Markets into 20/20:

Section 106 Agreements, CILs and cash strapped Housing Associations not met needs of social housing. In 40 years, sold 306,0000 but only built 62,000. Churchill/Macmillan in 1950s & early years

  • f Wilson built 400,000 pa.

Londoners salaries x 17 & UK x 7 years to save for a deposit. Chartered Institute for Housing (CIH) report found, the Help-to-Buy scheme “a nonsense.” £8bn. pa subsidises Private Housing construction, less than £2bn. to Social Housing. £15bn. assist Social Housing rents.

ALTERNATIVE INVESTMENT CLASS Living Investment Income Generating Portfolios:

Hotels, Private Apartments, Social Housing, Care Homes, Student Housing & Co-Living Apartments

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Property Markets into 20/20:

Perfect Vision or Blurred Uncertainty?

Buying goods, and food & beverage

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The Retail Rout & Technology

The result of a planning policy of “Sequential Testing”? What is a town centre for?

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The Retail Rout & Technology

  • Started with GFC in 2008. Closures or downsizing portfolios.
  • Openings or expanding include:

….JLP, Lidl, Aldi, The Range, Home Bargains, Primark, JD Sports, TK Maxx, ASAO, Farfetch, The Hut Group, Harrods, Burberry, H & M.

  • Clicks to Bricks include:

……….Amazon owners of Whole Foods, Fatfetch, Habitat.

  • Reinvent Towns: Morecambe, Whitley Bay, Altrincham.
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Property Markets into 20/20:

Perfect Vision or Blurred Uncertainty?

Industry, logistics & robots

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Industrial, Logistics, Technology & Robots

  • Industrial output has been

at a 10 years high BUT….Recent figures showed growth suddenly but hit 25-month low, lowest since 2016

  • Balance of Payments

“disaster” but only 12% of economy

  • Productivity of North has

improved !

  • Global slowdown – where

next?

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Industrial, Logistics, Technology & Robots

  • Has on-line Retail Rout plateaued ?
  • Fulfilment centres dominated by Robots.
  • Industrial “employment” increasingly in

creating and managing robots.

  • Core Distribution Area - Milton Keynes,

Peterborough, Doncaster, Manchester, Stafford……..PLUS Last mile logistics

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Offices & bots Property Markets into 20/20: Perfect Vision or Blurred Uncertainty?

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Offices & bots

Staff & Skills levels: HR management Property location, costs & design Information & Communication

Technology

& off-site working Major office occupiers for the world of flexible working:

WeWork, BizWork, Office Group, Workspace Group, Regus

TMT & FAANGS Sector dominate take up “Company’s assets are the people “

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TOP LEFT WWF Woking: Employees encouraged not to come to work. Wednesday is a challenge RIGHT WeWork Aldwych, London LOWER LEFT Mixed Use, Co-Working. Brick Lane, London

Offices & bots

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Property Markets into 20/20:

Perfect Vision or Blurred Uncertainty?

Invest: to stick or twist?

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UK Rental Value Growth, %pa

Industrial & Logistics rents growth fastest

Source: Real Estate Forecasting Spring 2019

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UK Commercial Property since 2016 Total Returns (Income + Capital Growth)

Remains ahead of inflation – just? Below zero capital growth till 2021

Source: Real Estate Forecasting Spring 2019

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Investment Markets: Total Returns (Rent &

Capital Change) % pa 2016 to Spring 2019.

Impact of Inflation, Interest Rates, Value of £ & Equities?

Source: Real Estate Forecasting Spring 2019

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UK Investment Yields - % pa: 1918-2019

initial property 5.81%, equity dividend 4.46% & long-dated gilts 1.67% Comfortable Yield Risk Premium between Property & Gilts

Source: Real Estate Forecasting Spring 2019 From the introduction of Monetary Policy Globally in 1980s, Gilts yield has steadily fallen. In 2019 it’s now below inflation.

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Current property investors

  • Domestic Institutions including debt.
  • Private investors
  • Overseas “Global” Investors

(London & UK, Hong Kong, Paris)

  • Local Authorities:

some are “rubbish deals” - Lord Matthew Oakshott

“Active fund managers have abandoned the long term”

Re Equity/Gilt markets - Anthony Hilton, Evening Standards

Repeat of “The Big Short” chaos of GFC?

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Property Markets into 20/20: Perfect Vision or Blurred Uncertainty?

Spring Spring 2019

Dr Angus McIntosh 2019