1
Market OverviewLucian Cook 30thJanuary 2019
Source: RICS, Nationwide 3
Sentiment & Brexit
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
-80
-60
-40
-20
0
20
40
60
80
Dec
-08
Jun-
09
Dec
-09
Jun-
10
Dec
-10
Jun-
11
Dec
-11
Jun-
12
Dec
-12
Jun-
13
Dec
-13
Jun-
14
Dec
-14
Jun-
15
Dec
-15
Jun-
16
Dec
-16
Jun-
17
Dec
-17
Jun-
18
Dec
-18
New
buy
er e
nqui
ries:
bal
ance
of o
pini
on
Annual House Price Growth New Buyer Enquiries
Source: Oxford Economics, Savills 4
Affordability
2019 2020 2021 2022 2023
Incomes
+2.0% +2.9% +3.4% +3.5% +3.5%
Source: Oxford Economics, Savills 5
Affordability
2019 2020 2021 2022 2023
Incomes
+2.0% +2.9% +3.4% +3.5% +3.5%
Bank base rate
1.0% 1.5% 1.8% 2.3% 2.8%
Source: Oxford Economics, Savills 6
Affordability
2019 2020 2021 2022 2023
Incomes
+2.0% +2.9% +3.4% +3.5% +3.5%
Bank base rate
1.0% 1.5% 1.8% 2.3% 2.8%
House prices
+1.5% +4.0% +3.0% +2.5% +3.0%
Five year forecasts
16.3%14.8% Income growth
House price growth
7
Stretched affordability
0%
5%
10%
15%
20%
25%
30%
Q4
88
Q4
90
Q4
92
Q4
94
Q4
96
Q4
98
Q4
00
Q4
02
Q4
04
Q4
06
Q4
08
Q4
10
Q4
12
Q4
14
Q4
16
Q4
18
Q4
20
Q4
22
Mor
tgag
e pa
ymen
ts a
s %
of i
ncom
e
Interest Interest & Capital Stress tested
Alleviating the pressure
Interest rates and affordability
Source: Savills Research, UK Finance, Oxford Economics 8
Stress tests are relaxed as rates rise
Buyer rise up the income
scaleThe profile of
buyers is more
weighted to lower value
markets
100kg
9
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
Q4
78Q
4 80
Q4
82Q
4 84
Q4
86Q
4 88
Q4
90Q
4 92
Q4
94Q
4 96
Q4
98Q
4 00
Q4
02Q
4 04
Q4
06Q
4 08
Q4
10Q
4 12
Q4
14Q
4 16
Q4
18
Hou
se P
rice
Rat
io
London v UK Outer Met v UK
Past the point of inflexion
Source: Savills Research, Nationwide, Land Registry
Five year forecasts
Source: Savills Research 10
21.6
%
20.5
%
19.3
%
19.3
%
19.3
%
18.2
%
17.6
%
12.6
%
9.3%
9.3%
4.5%
0%
5%
10%
15%
20%
25%
0%
5%
10%
15%
20%
25%
NorthWest
Y & H Wales East Mids WestMids
Scotland NorthEast
SouthWest
East ofEngland
SouthEast
London
Last year (2018 - 2022) This Year (2019 - 2023)
Transactions
Source: HMRC, UK Finance (to November 2018) 11
1,287,620in the year to June 2016
1,197,880in the year to November 2018
First Time Buyers370,100+12%+40,900
Buy to Let66,400-48%-62,500
Home Movers368,400-3%
-12,300
Cash Buyer392,980-12%-55,800
since the referendum
-7.0%since the referendum
0
50,000
100,000
150,000
200,000
250,000
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3
2010 2011 2012 2013 2014 2015 2016 2017 2018
New
hom
e EP
C re
gist
ratio
ns
Res
iden
tial t
rans
actio
ns
HMRC transactions New home EPC registrations
Housing delivery breaking the link with transactions
12Source: Savills using MHCLG, HMRC
Q2 2013Help to Buy introduced
16%
Q3 2018Help to BuyEntrenched
23%
49,262Help to Buy loans
year to June 2018(England only)
82% to first time buyers
Average equity loan(England only)
£53,356 excl London
£163,236 in London
Source: HMT 13
The future of Help to Buy
HTB extended
to 2023
From
£600kin London
Regional value caps
Restricted to
FTBs
To
£186kin the North
East
No scheme
after 2023
14
The effect of the restriction
18
Diversity on large sites
Help to Buy will be more targeted & only guaranteed to 20234
... & has formed 15 strategic partnerships with HAs to deliver 27,775 affordable new homes3b
Homes England has a focus on empowering small & medium sized house builders3a
Letwin pinpoints a need for more types and tenures with lower associated land values2
NPPF recognises it isn’t just a numbers games1
Momentum gathering in the BTR pipeline
19Source: Savills using BPF, Molior
240average size of scheme
under construction
27% of units being constructed by national
house builders
34%annual
increase in units
complete or u/c
8 investors
with >3,000 pipeline
56%units u/c are
outside London
22,7
62
31,2
50
29,4
16
43,3
74
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Completed Uncer Construction
Build to Rent UnitsDec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18
66,700 units also in
planning
24%of housing associations
in 2018
71%of housing associations
in 2017
Source: The Savills Housing Sector Surveys 2017 & 2018 20
Government policy as a development constraint for HAs
21
So, what is the problem?
Source: The Savills Housing Sector Survey 2018
2%Latent
liabilities4%
Brexit
20%Access to finance
27%Risk of market
downturn
30%Organisational
capacity
30%Construction
industry capacity
54%Grant
86%Availability
of land