Savills Research | The Residential Property Focus May 2009
and meeting the needs of tenants. Buy- institutional ones, to the market, whatever
Residential investment is
to-let investors needing any significant the total return. To find a wider investment
mortgage are effectively out of the market model, one which both lenders and
evolving, with new players
as the number of buy-to-let mortgage borrowers are comfortable with and under
seeing the current market as
products has shrunk from just over 3,500 in which the underlying occupational demand
June to 2007, to under 200 in March 2009. for housing can be met, it will be necessary
a cyclical buying opportunity.
We believe there will need to be a to further develop products such as shared
change in the way homes are owned and equity and ‘build-to-let’.
financed in order for investors to take It is unlikely to stop there. Recently, growth prospects, which may include
advantage of highly competitive returns, equity loan schemes (whereby an occupier development margins and a long-term
such as those that residential property is given an interest free loan on part of the regeneration premium.
has generated, despite the downturns purchase price for a fixed period) have Residential investment looks set to
of the last 20 years. These returns have been one of the most effective means of expand during the next 20 years, but in
generally out performed commercial bringing potential occupiers and property different ways to the experience of the past
property, equities and gilts whilst proving together when conventional models of two decades. n
less volatile than these other asset classes. raising a deposit have failed.
The difficulty for many investors is that, Variations on this model are also Jacqui Daly is a Director of Savills, and
increasingly, they have been reliant on emerging, alongside the Government’s specialises in the residential investment
capital growth, in the face of downward HomeBuy Direct schemes. We believe that market. Jacqui has 12 years research
pressure on income yields. there is huge scope for more investment experience in the residential sector.
whereby a third party retains patient equity She has substantial investment experience
Investment models in property, in a manner that enables them and has worked with a large variety
In certain situations, most notably in the to generate a return from it over the short, of clients including investment banks,
case of distressed sales, yields have now medium or long term. institutional clients, private investors, and
been restored to sufficiently competitive Residential investment is evolving, local Government.
levels to generate interest from those with new players seeing current market
already comfortable with the residential conditions as a cyclical buying opportunity.
investment model. Overall, we think that Some are attracted by income streams
income yields are still insufficient to bring from financial products sitting alongside
a wider range of investors, particularly the property. Others are attracted by capital
Stage 3 Stage 4
Green Shoots Blooming
Mortgage markets ease Depressed sectors start
/ economic growth to feel recovery
restored
Activity Investor activity
n Mortgage-dependent n First-time buyers
upsizers
Areas for investment Areas for investment
n Mainstream family n Mortgage dependent
housing buy-to-let
n Development
savills 05
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