A One Day Briefing
How Property Downturns End and Upswings Start
Chair
Dr Felix N. Hammond
Senior Lecturer in
Real Estate
University of Wolverhampton
Speakers
Dr Mark Andrew
Senior Lecturer
Cass Business School
Nigel Dubben
Principal Lecturer and Post Graduate Course Director, School of Surveying
Kingston University
Colin Jones
Professor of Estate Management
Heriot-Watt University
William Newsom
Head of Valuation
Savills
Peter Scott
Professor of International Business History
Reading University Business School
Ian Stockdale
Senior Partner, West End Property Finance Team
Clydesdale Bank
Peter Stoughton-Harris
Managing Director - European Valuations
DTZ
Programme
What causes property crashes? Cycles, Busts and Booms
• Stylised housing market cycles
- relationship between house prices and earnings
- role of supply and planning constraints
- influence of the macroeconomy
• Stylised commercial property cycles
- Yields/rents
- Underlying economic forces
- Development Time lags
• Macroeconomic forces versus property market influences
• The roles of surveyors, banks and financial institutions, and developers
• Distinguishing between trends and cycles
Colin Jones, Professor of Estate Management, Heriot-Watt University
How banks think and act during the swings in the property cycle - and insider’s view?
• The availability of capital from banks and developers
• The balance between sales and risk
• Lessons from the past – and unforeseen new problems
• The search for yield
• Income versus return on capital
Ian Stockdale, Senior Partner, West End Property Finance Team, Clydesdale Bank
The post-war property market – booms and busts and why they occurred
• The 1974 boom and recession: causes, property and property companies
• The 1991 boom and recession contrasted: similarities and differences
• Residential and commercial property: different results in different markets
• The 2008 crunch: another recession begins?
• Signs of an end to a property boom
Nigel Dubben, Principal Lecturer and Post Graduate Course Director, School of Surveying, Kingston University
Recovering from the first property crash: the aftermath of 1974
• The long property boom of 1965-1973
• Innovations in property investment and development finance
• Failures of regulation
• The secondary banking crisis and the Bank of England ‘lifeboat’ operation
• The reactions and policies of institutional investors during crash and recovery
• Why the institutional investors retained their confidence in property
• Long-term lessons
• Why the 1974 crash is different from the current downturn
Peter Scott, Professor of International Business History, Reading University Business School
The UK Housing Market in the 1980s: A larger but more vulnerable Owner-Occupation sector
The housing market in the 1980s was characterised by:
• A house price boom from the mid-1980s
• Mortgage market liberalisation
• Right-to-Buy sales
• Change in household profiles in homeownership
• Reduction in mortgage subsidies
• Rising household incomes
This presentation introduces the factors which contributed to a fundamental change in household behaviour in the homeownership market. However, it was only in the 1990s that the implications of some of the above changes became apparent.
Dr Mark Andrew, Senior Lecturer, Cass Business School
Bank lending over the last ten years
• The rise of the German lenders
• The rise of the Conduit lenders (CMBS)
• The entry of many other lenders
• The effect of competition between lenders on LTVs, Margins etc.
• The effect of low cost of money
• The high water mark: 30th June 2007
William Newsom, Head of Valuation, Savills
The 21st Century bull market and why it had to end
The Commercial market in the early 2000s was characterised by:
• The return of property as an asset class
• A massive supply of equity
• Globalisation of product
• The growth in the international investor
• Investors’ acceptable return is reduced
• Investors’ view on risk is minimised
• Risk becoming Global
• A huge enthusiasm from the banks to lend
• Squeezing of margins from all lenders
• The growth in the CMBS market
• A lack of rental growth
• A lack of speculative construction
• Low inflation environment
• Low interest rate environment
• The growth in the production and services available from India
This talk looks at the background to the factors which contributed to the high values in commercial property and explains why they were unsustainable if any one assumption proved to be false.
Peter Stoughton-Harris, Managing Director - European Valuations, DTZ
Panel Session
• Is it fundamentally different this time?
• What are the leading indicators of recovery?
• What to do and how to do it when the starting pistol is fired for the upswing
• The downturn/upswing and the rules of prediction local or global?