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

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 Estate Forecasting: End 2018 Real Estate Forecasting Limited

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?) Real Estate Forecasting Limited

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? Real Estate Forecasting Limited

Economic growth 2013-2019 UK GDP growth now below USA & EU one of worst in G7 & G20 countries. Its not just BREXIT which has caused this. UK Source: The Economist & IMF Spring 2019 Real Estate Forecasting Limited

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 Real Estate Forecasting Limited

Productivity one of lowest in Europe – people are cheap; investment risky & costly. Public AND Private long-term investment - extremely low. Source: BBC March 2019 Real Estate Forecasting Limited

Real wages now rising faster than Inflation but still much lower than in 2008, impact on retail spending and retail property Real Estate Forecasting Limited

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UK Budget Deficit: % 2016 & 2019 EU Maastricht Treaty target - 3% Euro Area USA UK China Real Estate Forecasting Limited

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% Real Estate Forecasting Limited

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 Real Estate Forecasting Limited

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 ! Real Estate Forecasting Limited

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 Real Estate Forecasting Limited

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. Real Estate Forecasting Limited

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. Real Estate Forecasting Limited

A “two speed” economy: why subsidized? Golden Diamond of the North v South East: UNIVERSITIES Bolton, Bradford, Chester, Durham, Huddersfield, Hull, Keele, Lancaster, Leeds, Liverpool, Manchester, Newcastle, Salford, Stafford, York 300,000 migrated out. Shortage of qualified employees. Real Estate Forecasting Limited

Liverpool, Leeds & Manchester are in the lead!......... BUT when will HS2 arrive? When will the train arrive into Question: Liverpool? Invest in Cross Rail 2 in congested South East OR Railways are behind Northern Rail system? the “pacer” trains. Real Estate Forecasting Limited

Property Markets into 20/20: Perfect Vision or Blurred Uncertainty? Planet earth: measuring the pollution of buildings Real Estate Forecasting Limited

Property Markets into 20/20 Climate Change: In addition to BREAM, EPCs, DECs, MEES, ESOS and more ………. An example – how to prepare for 50mm of rain in 30 mins! Real Estate Forecasting Limited

Property Markets into 20/20 (Most efficient Office: London West End wins) Office Type Whole GDP Per Ratio BCO PROJECT : Life person Economic OFFICE Kg. CO2 Sq.M. output to the whole-life CBD Central London Air-Con. 12,518K £4,500K 27 carbon pollution (including CBD Regional Air-Con. 10,758K £1,800K 57 transport) Regional City NON Air-Con. 9,303K £1,260K 67 footprint. Out of Town Business Parks 13,674K £1,629K 75 Air-Con. Real Estate Forecasting Limited

Property Markets into 20/20 (Most efficient Retail : Rail stations win!) Retail Unit Total Econ. Ratio REVO PROJECT : Whole Life Output Economic output A1/2Food Comb. Trans 70000 600000 8.5 (sales) A3 Combined Trans. 15600 72000 4.5 A1/2 Food Home Del. 61000 150000 2.4 to A1/2 O of T Food 313000 600000 1.9 whole-life A1/2 Click & Coll. Food 350000 600000 1.7 carbon pollution WORST (including A1/2 High St Non-Food 1468000 480000 0.33 transport) A1/2 Secondary H St. 379000 100000 0.26 A3 Out of Town 258000 60000 0.23 footprint. A1/2 High Street Food 1430000 300000 0.21 (nos. rounded up) A3 High Street 1155000 72000 0.06 Real Estate Forecasting Limited

Property Markets into 20/20: Perfect Vision or Blurred Uncertainty? Where we live? Real Estate Forecasting Limited

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 Real Estate Forecasting Limited

Old wealthy folk Young poor folk - tenants Age 18- 35-49 50-64 65+ House of 34 Commons % of report Populatio “250,000 new n homes pa to meet rising 28 25 24 23 demand” % of 500,000 pa Househol needed to d wealth make up 35 6 19 33 43 year back-log. Real Estate Forecasting Limited

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 of 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 Real Estate Forecasting Limited

Property Markets into 20/20: Perfect Vision or Blurred Uncertainty? Buying goods, and food & beverage Real Estate Forecasting Limited

The Retail Rout & Technology The result of a planning policy of “Sequential Testing”? What is a town centre for? Real Estate Forecasting Limited

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. Real Estate Forecasting Limited

Property Markets into 20/20: Perfect Vision or Blurred Uncertainty? Industry, logistics & robots Real Estate Forecasting Limited