Housing Market Conditions

South East London Housing PartnershipCarole Oliver, National Sales Manager 24th November 2009

Key messages

Re-pricing of housing market still has at least 12-24 months to run Slower headline price falls – prices ‘bumping along bottom’ Differential outlook for different segments

Low turnover ‘illiquid’ market here for next 3-5 years ‘Negative pent up demand’ for housing … More price volatility

New supply to remain subdued - adding to lack of liquidity Major viability problems have led to serious capacity constraints Rapid re-pricing of new build largely over now Very slow recovery in volumes over next 3-5 years

Full recovery with normal liquidity and modest price rises requires Improved economic outlook and confidence First time buyers able to access finance and bottom rung of ladder

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,00019

60

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Vo

lum

e o

f re

sid

enti

al s

ales

.

Actual transactions 000's

Source: Hometrack

Low ‘liquidity’ a support for pricing

… compounded back lack of new housing

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

2001 2002 2003 2004 2005 2006 2007 2008 2009

Private

Affordable

Rolling 12 month total starts

Source: NHBC

0

50,000

100,000

150,000

200,000

250,000

300,000

Feb

-07

May

-07

Aug

-07

Nov

-07

Feb

-08

May

-08

Aug

-08

Nov

-08

Feb

-09

Private

Public

Total

Monthly starts annualised

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%20

05 0

2

2005

04

2005

06

2005

08

2005

10

2005

12

2006

02

2006

04

2006

06

2006

08

2006

10

2006

12

2007

02

2007

04

2007

06

2007

08

2007

10

2007

12

2008

02

2008

04

2008

06

2008

08

2008

10

2008

12

2009

02

%yo

y ch

ang

e in

pro

po

rtio

n o

f sa

les

. Wealthy achieversUrban prospsperityComfortably offModerate meansHard pressed

Source: Hometrack

Green shoots limited to the low LTV ‘haves’

Defining the size of the affordability gap

£56

£58

£59

£63

£62

£60

£66

£70

£77

£83

£106

£108

£114 £1

23

£123

£128

£131

£154 £161

£184

£285

£55

£0

£50

£100

£150

£200

£250

£300

£350

Scotland N East Wales N West E Mids W Mids Y&H S West East S East London

£'s

per

wee

k -

2 b

ed p

rope

rty

Weekly cost of renting from an RSL

Weekly cost of buying a lower quartile priced flat with an 85% LTV and 5.6% mortgage

Source: Hometrack

Intermediate market - 1.6m 20-39 yr olds

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

N E

ast

N W

est

Y&

H

E M

ids

W M

ids

Ea

st

S E

ast

Lo

n

S W

est

Sco

t

Wa

les

No

. 20

-39

yr

old

wo

rkin

g h

ou

se

ho

lds

Source: Can’t Supply: Can’t Buy Narrow IHM - Young working households aged 20-39 who are on incomes too high to get benefit but couldn’t access the lower decile end of the market

… price falls have had an impact

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

N E

ast

N W

est

Y&

H

E M

ids

W M

ids

Ea

st

S E

ast

Lo

n

S W

est

Sco

t

Wa

les

No

. 20

-39

yr

old

wo

rkin

g h

ou

se

ho

lds Priced into market through house price falls

Priced out even with price falls

Source: Hometrack

… academic if you can’t get a mortgage

0

2

4

6

8

10

12

14

16F

eb-0

7

Mar-

07

Apr-

07

May-0

7

Jun-0

7

Jul-

07

Jul-

07

Aug-0

7

31-S

ep-0

7

Oct-

07

Nov-0

7

Dec-0

7

Jan-0

8

Feb-0

8

Mar-

08

Apr-

08

May-0

8

Jun-0

8

Jul-

08

Aug-0

8

Sep-0

8

Oct-

08

Nov-0

8

Dec-0

8

Jan-0

9

Feb-0

9

Mar-

09

Apr-

09

May-0

9

Th

ou

san

ds.

Credit impaired buy-to-let

Credit impaired residential

Prime buy-to-letPrime residential

Prospects for mortgage lending

Negative net lending in 2009 Banks re-structuring balance sheets - some still heavily constrained Fewer active players in mortgage market - no clear market leader

Drag on lending through Restructuring mortgage books Focus away from market share to maximising margin Focus on low risk / low LTV lending FSA prescription on lending policy and risk appetite Gross mortgage lending in 2009 a third of 2007 levels

Resumption dependent upon Bottoming out in economic decline and greater stability in house prices More competitive pricing of loans recently but for less risky customers Future will be different to the recent past

… must consider local market dynamics

Source: Hometrack

Terrace Housing Catford South Ward

Source: Hometrack

£40,000 the income required for a LQ Flat in Lewisham

Source: Hometrack

Overall market outlook

2009 ‘bounce back’ down to scarcity of housing for sale

Affordability improving on lower interest rates …

... but housing scarcity to remain a factor and keep entry prices relatively high

Mortgage availability to remain a drag on demand well into 2010/11 …

… especially with uncertain outlook for unemployment (incomes growth)

Drawn out period with prices tracking sideways until ‘true’ recovery

Opportunities exist as imbalances unwind …. but how to minimise risk

All about local market dynamics and pitching product accordingly

For further information:

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Carole OliverNational Sales ManagerT: 07889 995764E: coliver@hometrack.co.ukW: www.hometrack.co.uk