At present there is a sharp difference of opinion on the future direction of UK property prices. In one corner, a handful of vociferous media pundits are calling for an eminent correction. Whilst in the other, many expert fund managers are ploughing literally £billions of fresh money into this resilient sector. You can see why, too. According to 4 esteemed economists (Jorda, Knoll, Kuvshinov, Schularick, and Taylor), UK housing delivered average real returns (net inflation) of 5.6% p.a. between 1870-2015 and 6.8% since 1980 – split roughly 60:40 capital:rental – vs 2.8% and 4.7% pa respectively for bonds. Better still, when included within a basket of 16 major OECD countries, residential property has also been considerably more stable than equities. Never failing to increase in value over a 5-year period, and generating the highest risk-weighted gains of any asset class.
Sure, certain well-heeled Central London neighbourhoods have been experiencing price deflation of late. Yet for Watkin Jones’ bread-and-butter of supplying purpose-built student accommodation (PBSA), conditions remain buoyant. Underpinned by favourable demographics, healthy capital inflows and robust demand from international students (eg from China & India) who typically seek quality living space. The latter being further boosted by President Trump’s decision this year to issue far fewer overseas visas in the US.
Looking ahead we expect these trends to be sustained, and believe similar dynamics are taking root in the fledgling residential Build-to-Rent (BTR) market, principally aimed at young-City dwellers. Here, the firm sees scope to leverage its respected brand and technical expertise, along with forward selling their multi occupancy developments to yield-hungry institutional investors.
Well, this morning the Board released a positive trading statement for the 6 months ending March 2018, adding that demand remains strong, and H1 results (due on 22nd May) would be in line with FY18 expectations.
22nd May) would be in line with FY18 expectations. In terms of specifics, WJG has a development pipeline of >9,800 student beds (vs 9,120 Sept’17), of which around 8,300 (or 85%, up from 7,497 at y/e) possess planning permission. All sites due for delivery this academic year (3,415 beds) have been forward sold with another 5 (2,675 beds) slated for 2019/20. Thus providing solid forward visibility.
For BTR, 3 sites secured planning in H1, located in Bournemouth, Sheffield and Sutton – lifting the total consented pipeline to ~700 units. On top, another significant development in Uxbridge is progressing well - with the group now controlling 5 BTR schemes and in constructive negotiations on several others, from which it expects to deliver over 1,500 units during the next 5 years.