Table of Contents
Issues in the Market
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- Key issues explored
- Market definitions
- Abbreviations
Future Opportunities
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- Despite the downturn, property investment is still appealing to many…
- …although appetite has waned over the past year or so
- New property fund business will mainly come from virgin investors
- Falling house prices present an opportunity for some
- Property or pension?
Market in Brief
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- Current state of the buy-to-let market
- Buy-to-let outlook: Some positives as well as negatives
- Current state of the property fund market
- Property fund outlook: Finding opportunity in a crisis
- One in eight UK adults own some form of property investment
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- Figure 1: Ownership of direct and indirect property investments, by types, March 2009
- Indirect property investors are a pragmatic bunch
- Collective investments perceived riskier than UK residential property
- Consumers expect prices to fall further over the next 12 months…
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- Figure 2: Expectation of house price movement, March 2009
- …but there are still potential buyers out there
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- Figure 3: Financial priorities over the next 12 months, March 2009
- Buy-to-let has wide appeal
- Most people think property is a good bet for the long term
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- Figure 4: Agreement with statements about buying and investing in property, March 2009
Economic and Investment Environment
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- Key points
- Summary of the main macroeconomic indicators
- Bank base rate slashed
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- Figure 5: Average annual changes in the bank base rate, CPI and RPI – UK, 2000-09
- LIBOR and base rate gap narrows
- Stockmarket turmoil – have we passed the bottom?
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- Figure 6: FTSE 100 and FTSE All-Share – daily index movements, April 2000-April 2009
- Commercial property fund returns take a dive
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- Figure 7: Commercial property returns, by sector, 2003-08
- Implication and opportunity
Housing and Rental Markets
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- Key points
- Credit crunch slows housing activity…
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- Figure 8: Number of UK residential property transactions with a value of £40,000 upwards – seasonally adjusted, Q2 2005-Q1 2009
- …leading to growth in accidental landlords
- Sharp drop in house prices
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- Figure 9: Annual house price growth in the UK – comprison of four sources, 2003-08 (Quarter 4)
- A silver lining?
- Rental yields edging up?
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- Figure 10: Average rental yields – England and Wales, May 2003-June 2008
- Geared investments offer better returns than cash buys
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- Figure 11: Annual rates of return on buy-to-let investment – cash purchase, by region, Q1 2009
- Figure 12: Annual rates of return on buy-to-let investment – geared investment, by region, Q1 2009
- Most residential investment landlords are in it for the long haul
- Landlords must contend with increased paperwork
Social Drivers – UK Rental Market
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- Key points
- One in seven dwellings in England and Wales are privately rented
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- Figure 13: Distribution of dwellings, by tenure – England and Wales, 1981-2008
- Buy-to-let finances two fifths of privately rented homes
- Changing social trends fuel demand for rented property
- Rise in one-person households
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- Figure 14: Total number and average size of households in the UK, 1991-2014
- Recession could drive up the divorce rate
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- Figure 15: Number of marriages and divorces – England and Wales, 1996-2006
- Students are a key target market for private landlords
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- Figure 16: Number of students in Further and Higher Education – UK, 1970/71-2006/07
- Recent years have seen more people enter the UK than leave…
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- Figure 17: International migration flows, 1975-2007
- …but is this about to change?
- Sharp drop in new private builds expected
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- Figure 18: Number of permanent dwellings completed, by tenure – UK, 1990/91-2007/08
Competitive Context
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- Key points
- Rising house prices boosted personal wealth over 1999-2007 period
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- Figure 19: Net worth of the UK household sector, 1999-2007
- All change
- Second homes
- The allure of property…
- …but cash is king
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- Figure 20: Preferred option for saving for the future, March 2009
- Competition comes from within the property sector as well as from outside
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- Figure 21: Summary of the competitive environment for retail property investment, 2009
- Returns on property versus other major asset classes
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- Figure 22: Total returns, by asset class, 2004-07
- Implication and opportunity
Direct Investment: Strengths and Weaknesses
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- Figure 23: Buy-to-let mortgage market – SWOT analysis, 2009
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Direct Investment: Buy-to-let Market Overview
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- Key points
- The rise of buy-to-let
- Credit crunch forces major market contraction
- Many lenders have exited the market
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- Figure 24: Market share of the top buy-to-let mortgage lenders, by amounts outstanding, 2008
- Market expansion slows
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- Figure 25: Number and value of buy-to-let mortgages outstanding, 2000-08 (year end)
- New business levels fall
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- Figure 26: Number and value of new buy-to-let mortgage advances, 2000-08
- Arrears and repossessions rise
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- Figure 27: Buy-to-let mortgages three or more months in arrears and with receiver of rent in place, 2007 and 2008
- Outlook for 2009
- Make way for the big boys
- Not all bad news
Indirect Investment: Strengths and Weaknesses
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- Figure 28: Indirect property investment market – SWOT analysis, 2009
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Indirect Investment: Property Funds Overview
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- Key points
- Financial crisis damages confidence in property funds
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- Figure 29: UK domiciled unit trust and OEIC funds under management – property versus whole market, 2004-08
- In 2008, more money flowed out of the sector than in
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- Figure 30: Net sales of property unit trusts and OEICs, 2004-08
- Meeting demand for instant accessibility can be problematic
- Outlook for property funds
- REITs experience tough times
- Falling value of UK-based REITs
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- Figure 31: Market capitalisation of UK-based REITs, July 2008 and May 2009
- Outlook for REITs
The Consumer – Preferred Investment Approach
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- Key points
- Survey background
- Cash is best
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- Figure 32: Preferred option for saving for the future, by gender and socio-economic group, March 2009
- Implication and opportunity
- Over a third of 25-34-year-olds put their faith in property
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- Figure 33: Preferred option for saving for the future, by age, March 2009
- Implication and opportunity
The Consumer – Asset Ownership
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- Key points
- One in eight in the UK invest in property
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- Figure 34: Ownership of savings and investments, by gender, March 2009
- Profile of a typical property investor
- The results in detail
- Most property investors invest directly
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- Figure 35: Ownership of property investments, by gender and socio-economic group, March 2009
- Implication and opportunity
- Over-55s represent the key target market for property funds
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- Figure 36: Ownership of property investments, by age, March 2009
- Implication and opportunity
- Note
The Consumer – Perception of Risk
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- Key points
- More people think investing in property is ‘risky’ than ‘safe’
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- Figure 37: Perceived level of risk associated with selected savings and investments over the medium to long term, March 2009
- Property investors get wake-up call
- AB, C2s and those aged 45-54 have the greatest faith in UK residential property
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- Figure 38: Perceived level of risk associated with UK residential property over the medium to long term, by gender, age and socio-economic group, March 2009
- Four in five over-55s view overseas residential property as risky
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- Figure 39: Perceived level of risk associated with overseas residential property over the medium to long term, by gender, age and socio-economic group, March 2009
- Commercial property gets riskier with age
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- Figure 40: Perceived level of risk associated with commercial property over the medium to long term, by gender, age and socio-economic group, March 2009
The Consumer – Investor Experiences
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- Key points
- Property investors are down but not out
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- Figure 41: Agreement with statements about investing in property funds, March 2009
- Implication and opportunity
The Consumer – House Price Predictions
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- Key points
- Two thirds expect house prices to fall further over the coming year
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- Figure 42: Expectation of house price movement, March 2009
- Implication and opportunity
- Expectations are influenced by personal aspirations
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- Figure 43: Expectation of house price movement, by gender and age, March 2009
- Implication and opportunity
- Property investors are generally more bullish
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- Figure 44: Expectation of house price movement – total sample versus property investors, March 2009
The Consumer – Financial Priorities
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- Key points
- Managing household expenses and repaying debts are people’s top priorities
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- Figure 45: Financial priorities over the next 12 months, March 2009
- Subdued investment environment…
- …and reduced housing activity
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- Figure 46: Financial priorities relating to property over the next 12 months, 2008 and 2009
- Implication and opportunity
- Men and women have slightly different financial concerns
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- Figure 47: Financial priorities over the next 12 months, by gender, March 2009
- Priorities change with age
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- Figure 48: Financial priorities over the next 12 months, by age, March 2009
- Implication and opportunity
- One in eight landlords expect to make further acquisitions
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- Figure 49: Financial priorities over the next 12 months – total sample versus property investors, March 2009
The Consumer – Attitudes towards Property Investing
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- Key points
- Buying property is a good investment, say over half of all adults
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- Figure 50: Agreement with statements about buying and investing in property, by gender, March 2009
- Implication and opportunity
- The over-55s have the greatest faith in property
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- Figure 51: Agreement with statements about buying and investing in property, by age, March 2009
- Implication and opportunity
- 42% of direct investors prefer to invest in property than in a pension
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- Figure 52: Agreement with statements about buying and investing in property – total sample versus property investors, March 2009
- Implication and opportunity
The Consumer – Identifying Buy-to-let Targets
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- Key points
- A third of adults are open to the possibility of buy-to-let
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- Figure 53: Agreement with statements about investing in buy-to-let, by gender, March 2009
- Implication and opportunity
- The younger age groups have higher concentrations of BTL prospects…
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- Figure 54: Agreement with statements about investing in buy-to-let, by age, March 2009
- …as do those on the higher end of the socio-economic scale
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- Figure 55: Agreement with statements about investing in buy-to-let, by socio-economic group, March 2009
- Further analysis
Appendix – Property Investor Profile
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- Figure 56: Demographic profile of property investors, March 2009
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