Trafalgar New Homes Ltd (formerly Combe Bank Homes) and Trafalgar Retirement+ Ltd (formerly Beaufort Homes) are  trading entities and wholly owned subsidiaries of Trafalgar Property Group Plc .
For information about Combe Bank Homes / Trafalgar New Homes Ltd: www.trafalgarnewhomes.co.uk      For information about Beaufort Homes / Trafalgar Retirement+ Ltd: www.trafalgarretirement.plus


+44 732 700 000

info@trafalgarproperty.group

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Latest Market Analysis



Strategy



Strategy Our markets Latest market analysis

The  Group benefits from availability of bank finance on competitive terms, Trafalgar New Homes Ltd having established a strong asset base and income cover over cost of borrowing, a sound track record even during the exceptionally difficult market conditions following the 2008 financial crisis, and good relationships with a range of lenders. This is an advantage over many competitors who are unable to raise bank finance at all. The Chief Executive also has cash resources available to invest as required.  The market listing of the shares may in due course be a further source of capital funding. The Group intends to capitalise upon its funding sources to acquire  and develop prime new build land sites on a favourable cost base, where opportunities arise and it is prudent to do so.

The Group is focused on its niche market of developments consisting 4 to 20 units. Competition to purchase  development sites in this unit size range is low,  as these sites are  too small for national and major regional house builders who require greater scale to cover administrative overheads, and are too large to be funded by the small jobbing builder. Within this niche market, there are opportunities to negotiate land acquisitions on favourable terms.

The Group has a small management team with fast and easy lines of communication, and key decisions can be taken quickly and positively.

The Group outsources construction work and professional services, thereby operating a minimal Head Office operation with low fixed overheads, and can thereby scale the trading activity up or down very quickly to react to changing market conditions and opportunities.

Consequent upon the acquisition of Trafalgar Retirement+ (formerly Beaufort Homes), it is intended that Trafalgar New Homes (formerly Combe Bank Homes) and Trafalgar Retirement+ will be run as distinct businesses. Trafalgar New Homes has been and will continue to develop residential properties in the South East of England and Trafalgar Retirement+ will continue to expand its land bank and development sites through the identification of suitable land for assisted living schemes, securing the land through option agreements and obtaining planning permission.

Effective implementation of this strategy will be judged by achievement of anticipated increased earnings per share.

Principal risks & uncertainties

Set out below are certain risk factors which could have an impact on the Group's long term performance.  The factors discussed below should not be regarded as a complete and comprehensive statement of all potential risks and uncertainties facing the Group.

The principal risks and uncertainties facing the Group are:

1. Any possibility that lending criteria from the Group’s bankers may harden with little prior notice.

2. Construction costs may escalate and eat into gross profit margins.

3. Heavy overheads may be incurred especially when projects have been completed and before others have been commenced.

4. The Group could pay too much for land acquisitions.

5. The Group might fail to adhere to good corporate governance policies.

6. The Group’s reliance on key members of staff.

The Group considers that it mitigates these risks with the following policies and actions:

1. The Group affords its bankers and other lenders a strong level of asset and income cover and maintains good relationships with a range of funding sources from which it is able to secure finance on favourable terms.

2. Construction costs are outsourced on a JCT Design and Build fixed price contract basis, thereby passing on to the contractor all risk of development cost overspend, including from increased material, labour or other costs.

3. Most other professional services are also outsourced, thus providing a known fixed cost before any project is taken forward and avoiding the risk that can arise in employing in-house professionals of a high unproductive overhead at times when activity is slack.

4. Land buying decisions are taken at board level, after careful research by the Directors personally, who have substantial experience of the house building industry, potential construction issues and the local market.

The Group focuses on a niche market sector of new home developments in the range of 4 to 20 units.  Within this unit size, competition to purchase development sites from land buyers is relatively weak, as this size is unattractive to major national and regional house builders who require a larger scale to justify their administration and overheads, whilst being too many units for the jobbing builder to finance or undertake as a project.  Within this market, there are opportunities to negotiate land acquisitions on favourable terms.  Many competitors who also focus on this niche have yet to recapitalise and are unable to raise finance.

5. The Group has a rigorous corporate governance policy appropriate for a publicly quoted company now listed on AIM.

6. Many of the activities are outsourced and each of the Directors is fully aware of the activities of all members of staff enabling adequate cover when needed.

Trafalgar New Homes strategy

Trafalgar New Homes will consider development opportunities in its chosen area of operation, to further its residential development activity.

Additionally the company has a strategic site at Staplehurst, Kent under option. The Directors consider that this site presents an interesting opportunity and the planning  focus is on achieving planning permission for an extra care or assisted living scheme on this site.

The Company has also acquired residential development sites at Ripley and Chessington from the portfolio of Trafalgar Retirement+ (formerly Beaufort Homes).

Demand for new housing in the South East remains strong and continues to benefit from the Government’s Help to Buy scheme. Whilst the uncertainty over the UK’s future relationship with the EU may impact parts of the market, the Directors believe that the pressure to increase housing stock in the southeast of England is likely to open up opportunities to bring strategic land through the planning process. The Directors believe that areas without an up to date local plan or with insufficient land supply offer the greatest potential. With the support of the range of measures to encourage house building set out in the recent Government budget, the Company is seeking to take advantage of the opportunities that present themselves.

Trafalgar Retirement+ strategy

Of the development sites that Trafalgar Retirement+ has secured under option and subject to planning, a planning application has been submitted on one site for residential redevelopment, and a ‘pre-app’ process has been started for assisted living schemes for its proposed two larger sites, prior to the submission of formal planning applications. Further sites are under consideration, with negotiations ongoing with property owners to enter into option agreements.

Trafalgar Retirement+ management has more than 50 years experience in land assembly, housing developments, construction and the growing assisted living/extra care market. The Enlarged Group will specialise in the identification of suitable sites within the M25 corridor and land opportunities in the affluent towns and villages of the South East of England.

The Enlarged Group has a dedicated land team to identify further suitable sites, approach land owners and agree a nominal option fee with each owner. The Enlarged Group will then apply for planning and, when successful and if appropriate, will exercise its option.

Typically, each assisted living scheme is expected to consist of 50-80 one and two-bedroom apartments, close to shops, transport and local amenities. The approach to securing the land through option agreements for development aims to minimise any potential financial and other risks to the Enlarged Group if market conditions falter.

The Directors believe the Enlarged Group will have the capacity within its existing management and network to significantly increase its development pipeline of assisted living schemes and grow the Company organically. This will not, however, preclude the Enlarged Group accelerating profitability by selective acquisitions that would integrate with, and add significant value to, the long-term aspirations of the Enlarged Group.











Our markets



Market Dynamics in the South East

The decision to exit the European Union at the end of June 2016 was unprecedented. It led to an immediate drop in the value of sterling and a sell-off in house building stocks. Following the initial market panic the stock market has rebounded in anticipation of improved macro-economic conditions. However, it is too soon to predict the long-term impact of Brexit on the UK homes market.

The market fundamentals remain strong with robust demand for homes as a result of chronic undersupply. A recent report by the Resolution Foundation showed that home ownership in the UK had dropped to its lowest levels in 30 years, with outer London seeing the second biggest drop of 13.5% to just under 58%. We strongly believe that as long as planning restrictions remain obstructive there will continue to be a considerable shortage of housing supply in the South East.

These fundamentals provide attractive opportunities for house builders with the right strategic focus and access to finance. We are confident that our focus on traditional housing for a wide range of buyers in the South East, along with the price of our current housing stock, will keep sale prices stable and we will continue to attract customers. The recent increases in Stamp Duty Tax are mainly applicable to the luxury end of the market and do not adversely affect our operations. The Group remains committed to building new homes in the South East that are in such high demand.

Central London is a market largely divorced from the rest of the UK, in that it operates as a global city and attracts global funds. Pre-credit crunch the Central London market was strongly driven by City bonuses, now overseas equity sources are more important. Price differentials between Central London and the country have never been greater, giving unprecedented opportunities for buyers selling in London to release equity and/or enlarge their accommodation in the countryside. The prime region for such movement of equity out of London is to the South East, especially locations with fast access to central London (eg Sevenoaks).



Mainstream Markets five-year forecast values, 2019-23:


Forecast change

2019

2020

2021

2022

2023

5 years to end 2023

UK

1.5 %

 4 %

 3 %

2.5 %

3 %

14.8 %

South East

0 %

2 %

2.5 %

2 %

2.5 %

9.3 %

Forecast data from Savills Research. Trafalgar New Homes Plc takes no responsibility to prospective investors for its assessment of future market trends. Investors should make their own assessment of market prospects taking their own independent advice.

Market Overview

The residential property market in the UK has been depressed since the global financial crisis and has been severely constrained by the consequent lack of funding for mortgage applications. However, recent research indicates that the market is now showing signs of stability. The Office for National Statistics (ONS) estimates that in the 12 months to March 2013 house prices in the UK rose by 2.7 per cent., buoyed by larger rises in London and the South East. In addition, the Government has launched a number of initiatives, such as The National Planning Policy Framework, NewBuy, Help to Buy and the Bank of England’s Funding for Lending, targeted at stimulating the market:

● Help to Buy – Help to Buy is a £5.4 billion package announced in the March 2013 budget designed to tackle long term problems in the housing market. It consists of two schemes, an “equity loan” where the government will lend a buyer up to 20 per cent. of the value of a new build property and a “mortgage guarantee” where lenders will be incentivised to make more mortgages available to people with small deposits. Now extended to 2020.

The “equity loan” scheme became effective from 1 April 2013 and is available for buyers with a minimum 5 per cent. deposit but only for new build homes with a value of up to £600,000. The loan is interest free for the first five years and from year six a fee of 1.75 per cent. is payable which rises annually by RPI inflation plus 1 per cent.

The “mortgage guarantee” is available on either new build or existing properties but is scheduled to end in December 2016.

● The National Planning Policy Framework (NPPF) – The NPPF was published by the Department for Communities and Local Government in March 2012 and was designed to speed up and simplify the planning approval process. In January 2013 the DCLG also launched the Red Tape Challenge which planned to cut red tape by removing or amending around 100 small housing and construction regulations and make sensible changes to regulatory burdens.

● NewBuy – NewBuy was launched by the Government in March 2012 and is aimed at first time buyers and those who already own a home who only have funds for a 5-10 per cent. deposit on the home they wish to buy. The lenders participating in the scheme provide a 90-95 per cent. loan-to-value mortgage for buyers meeting their qualifying criteria. It is available in England on all the properties offered by home builders participating in the scheme up to and including a sale price of £500,000.

● Funding for Lending (FLS) – The £80bn FLS was set up by the Bank of England in July 2012 to help provide cheaper loans and mortgages to both individuals and businesses. Banks and building societies have been given access to cheap money on the condition that they then lend this on at competitive rates. The scheme will close in January 2018.

● Help to Buy: Starter Home - will enable first-time buyers under 40 to purchase a home at 20% discount to the market price. Under the scheme, which the Conservatives say will deliver 100,000 over five years on new brownfield land, developers would be exempt from paying Community Infrastructure Levy (CIL), off-site S106 contributions, including affordable housing and the homes would not have to meet the full zerocarbon standard. This scheme is planned, but not yet available.


In June 2016 a referendum voted to leave the European Union (Brexit). An initial assessment of the implications can be found here.


Links to latest market commentary for London and the South East

Savills Residential Property Forecasts, Autumn 2018

Price Growth: “At this point in the property cycle, growth in London typically slows as price rises ripple out to the regions. This time, the divergence appears even more marked. With Brexit uncertainty in the short term, a general election on the horizon and rising interest rates, stretched affordability will limit growth in London and the South.”

Cash Buyers: “In the longer term, their activity will be influenced by the development of the retirement housing sector – which remains one of the biggest opportunities still untapped in UK housing.”

New Homes Development: “The strongest growth in output over the next five years is likely to come from smaller housebuilders, housing associations and local authorities”

Savills Residential Property Forecasts, Autumn 2018


Savills Prime UK Residential - Autumn 2018 report

Market conditions will change over the next five years. The patterns of the prime housing market might not be easy to predict but, taking the medium-term view, there is a place for cautious optimism.

Savills Research - Prime UK Residential Autumn 2018


Savills Spotlight - UK Cross Sector Outlook

The uncertainty over the UK’s future relationship with the EU will continue to cast a shadow over economic growth throughout 2018, leading to a more cautious outlook amonst investors across all sectors…. Although sentiment and activity may be subdued, it doesn’t mean investment will stop. The decline in mortgaged buy to let investors will create opportunity in the build to rent market, while investment focus will shift to the regions.

Savills Research - Spotlight, 2018


Savills Spotlight - Residential Property Forecasts

… return to growth in 2019-20, as employment, wage and GDP growth swing back towards trend levels. But, in the longer term, we will face the impact of interest rate rises.

Savills Research - Spotlight, Autumn 2017


Savills Spotlight - The Global Financial Crisis, 10 years on

The effects of the Global Financial Crisis, which began in 2007, are still being felt a decade later, and will continue to influence the housing market in the years ahead.

Savills Research - Spotlight, July 2017


Savills - Prime London Residential Markets

One year on from the Brexit vote, prime London house prices have continued to soften, with small falls recorded in both central and outer prime locations over the past quarter.

Savills Research - Market in Minutes, July 2017


Savills Spotlight - Prime Residential Rents

Headline rents continue to slide across prime London and the commuter belt in the face of uncertainty. But pockets of the market are bucking the trend – some as a direct result of the Brexit vote.

Savills Research - Spotlight, July 2017


Savills - UK Residential Development Land

Housing associations, along with small and medium-sized housebuilders, are providing greater diversity to the traditional range of land buyers. With new finance and incentives, they are building more too.

Savills Research - Market in Minutes, July 2017


Savills Spotlight - How to match the expectations of buyers and sellers

It’s a rare moment when we can say that the prime housing markets beyond the capital  have performed better than London. But that has  been the case since the middle of 2014.”

Savills Research - Prime London and Country 2017






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