IP Global Your Property Investment Partner

1. IP GlobalYour Property Investment Partner Llewelyn James – Senior Consultant

2. Is the Help to Buy Scheme Fuelling the Next UK Property Bubble ? • Background • Funding for Lending July 2012. 70 Billion GBP made available to lenders • Help to Buy Phase 1 April 2013 5% deposit 20% equity loan new build only • Help to Buy Phase 2 Oct 2013 5% deposit 15 % mortgage guarantee older properties as well as new build • RBS Halifax Bank of Scotland Lloyds Santander HSBC all signed up • Two thirds of UK mortgage market 12billion available • 3 year life span Bank of England will review annually

3. UK Property a Tale of Two Markets • Nationwide HPI: -8% in absolute terms -13% excluding London • Adjusted for inflation over 20% down • Hawthorns 25% below peak of 2007 • Other metrics: 27,000 mortgage products in July 2007 just 2,200 two years later now 5000 • Transaction volumes half the peak • Mortgage approvals 110-120K per month back in 2007 now 50-60K pm • Affordability : 1st time buyers spending 29% of take home pay on mortgage in line with average • Excluding London talk of a housing bubble not just premature but a non starter

4. What about London ? Global • Nationwide Building Society HPI : 8% above peak but still below peak adjusted for inflation • Only Prime Central London is at an all time high in inflation adjusted terms • Signs of possible bubble? • Return of sealed bids and gazumping in some areas • Definition of a bubble is where the price of an asset bears no relation to it’s intrinsic value • London and particularly prime central London have good fundamentals

5. London – A Global Economy • Ranked 5th among global cities by GDP per person – First or second in most other rankings.(Economist, 30/07/2012) • “financial services to bounce back in 2014 and together with business services drive the London economy, resulting in total GVA growth between 3% - 4% for the following five years.” (DmitriyGruzinov, Economist at Oxford Economics) • Estimated 374,000 jobs to be created in London between 2013 and 2018 – that’s 1 in 4 jobs across the UK (Xinhua, 01/05/20 • London has been voted the world’s second most important centre for the technology, media and telecommunications centre ahead of LA, Paris, Berlin and Silicon value. (Property Magazine EU, 01/02/2013) Source: Risk.net, momentum investment; DTZ, Oxford Economics; Citibank, Savills, Knight Frank, House of Commons Bulletin August 2012

6. Residential London Real Estate • Ranked fifth among global cities by GDP per person – first or second in most other rankings (Economist, 30/07/2012) • Estimated 374,000 jobs to be provided between 2013 and 2018 – that’s 1 in 4 jobs across the UK (Xinhua, 01/05/2013) • Transforming from a financial services economy to a multi-industry economy. Industries such as media, technology as well as business consultancy and accountancy are fuelling this change (money-marketuk, 12/01/2013) • DmitriyGruzinov, Economist at Oxford Economics, added: “… looking ahead we forecast financial services to bounce back in 2014 and together with business services drive the London economy, resulting in total GVA growth between 3 percent and 4 percent for the following five years." • Limited Supply: Current expected new stock delivery is 13,300 units per annum over the next five years – 35% below the Mayor’s target (Savills) • 35% of deals closed in cash higher than in 2007 much in Prime central London (Financial Times) • Since 2007 total international cash invested into London’s residential markets has topped GBP18 billion (property week 03/05/2013) • Increasing Demand: Over the past 18 months international buyers account for 34% of sales by volume and 49% by value (property week 03/05/2013) • Central London prices forecast to grow 31% to 2018 (knight Frank)

7. London-10 Year Performance Comparison

8. No bubble but what about the future? • Help to Buy is just getting going • 2 Key factors : Supply & Demand • How much uptake how many new buyers will enter the market • First phase of Help to Buy linked to supply to what extend will the rise in prices motivate developers to increase supply • 2nd Phase is not, so potentially more inflationary • UK housing supply inelastic and hasn’t built enough homes to satisfy demand since 1950’s • On the other lenders have promised no relaxation of income multiples or a return to self certification mortgages.

9. In Conclusion • To early to assess the full impact of Help to Buy • With only 12 Billion provided for the 2nd phase if there is a big take up the funds could run out before the scheme comes to an end • Help to Buy alone is unlikely to precipitate a full blown bubble • Confident as a consequence of the scheme UK house prices will rise over the next few years • Savills forecast of 18% price growth in the UK house market to the end of 2017 • Now is as a good a time as any to gain exposure to the UK property market just as the 2nd phase of Help to Buy gets underway

10. Questions?

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