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: o Creates jobs o Enables economic mobility within and to London o Provides stability to families o 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: o Scale o Reputational risk and management concerns o Return profiles (in comparison to other assets) o Availability of land o Lack of translators and experts o Structure

The Current State of Play  Growing acknowledgement of the problem :- ‘Generation Rent ’ o 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: o Will the changes that the Government has introduced go far enough to generate significant new flows of investment? o 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 o 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