House prices hard to predict, the future of regen & how to persuade older homeowners to downsize?
Making sense of the latest trends in property and economics from around the globe.
4 minutes to read
Suburban renters
More people than ever are now likely to rent throughout their lifetime, through both choice and necessity. More than one in four privately renting households are aged between 35 and 44, up from 17% a decade ago and fewer than 10% back in 2000.
Many seek to migrate to the suburbs around that age - an evergreen trend that has accelerated during the pandemic. As today's young urban renters age, the cohort will swell even further.
It's one of several factors underpinning a surge in investment targeting the nascent suburban Build to Rent market. So far, investment has been relatively small - about £275 million of institutional capital has been invested in the market since the start of 2020. New research from Knight Frank, however, indicates £7.8 billion of institutional capital is targeting the sector.
It's clear investors want exposure to different geographies and a diversified demographic, made up more of families than young professionals. Families tend to be less frequent movers – given their ties to local schools, employment and support networks. That means a lower turnover of tenants, longer tenancy terms and fewer and shorter void periods, all of which help maintain more secure income streams.
Urban regeneration
Landsec's offer to buy U+I Group for £190 million included some interesting insights as to how the developer is thinking as we emerge from the worst of the pandemic. The release is worth reading, but a couple of points stand out:
"The Covid-19 pandemic has accelerated the blurring of lines between where people live, work and socialise. In response to this, mixed-use developments with a clear sense of place are becoming a more important part of the fabric of cities."
And:
"Landsec believes that it can accelerate the pace of development...by combining Landsec's own development capabilities and the strength of its balance sheet, with U+I's placemaking skills, which emphasise: (i) unlocking overlooked, underestimated sites, (ii) community-led neighbourhood planning, and (iii) purposeful construction of mixed-use neighbourhoods, infrastructure and public spaces."
Downsizing
Housing minister Chris Pincher wants older people who are “rattling around” in their large homes to downsize, freeing up space for first time buyers who want to start families.
Mr Pincher said four in ten homes are too big for their owners and the government is considering ways to encourage developers to build more homes for pensioners.
We talked about the shortfall back in August. The number of seniors housing units in the UK is forecast to increase by 9% over the next five years, taking the total supply to just shy of 820,000. That's not insubstantial, but it still only equates to about 3% of the total housing stock. Meanwhile, data from the ONS suggests the number of people aged 65+ is forecast to rise by 22% to 15.1 million in the coming decade.
A stamp duty cut for the over 60s has long been mooted as an incentive to move beyond the availability of suitable housing. In comments to the Built Environment Committee, Mr Pincher said any tax incentives were up to the chancellor.
Interest rates
Some numbers from the Telegraph ahead of the Bank of England's decision on interest rates tomorrow:
Short positions taken against sterling have halved in the past three weeks, putting the market's overall position on the pound at its most positive in almost four months. Sterling is now at its highest level versus the euro since the onset of the pandemic.
Markets now put the probability of a rate hike tomorrow at 90%.
Zillow
Zillow is a US portal for purchasing homes online, a bit like Rightmove in the UK. Unlike Rightmove, Zillow moved into the business of buying and selling property itself, seeking to harness its data and algorithms to predict the movement of prices.
The company shut down that side of the business yesterday after it became clear that their ability to time the market was less precise than they had hoped. This comes a couple of days after Bloomberg revealed the company was pitching about 7,000 homes worth about $2.8 billion to institutional investors.
"We've determined the unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility," said co-founder and CEO Rich Barton.
In other news...
Lee Elliott on the climate crisis: why corporate real estate needs to do more.
Elsewhere - the government can’t duck more drastic business rates reform (FT), nature inspires the next generation of New York offices (FT), bankers committing to net zero don't agree on what it means (Bloomberg), and finally, your new office set up is going to look at lot like the old one (Bloomberg).