According to the London Development Barometer (LDB), the London property and development industry is unimpressed with the central and local governments when it comes to enabling development activity: 82% of the survey respondents believe they are not doing enough.
While this is an improvement over the 86% who believed the same a year ago, it is against a backdrop of significant proposed and enacted policy announcements that included an overhaul of the National Planning Policy Framework; the update of the London Plan; a revamp of stamp duty rates; and a range of policies to boost home ownership, social housing and infrastructure spending. It is also in a year in which the Brexit negotiations should have provided some clarity to the transition out of the European Union.
The bi-annual LDB was launched by M3 Consulting in Autumn 2017 to track the changes in market sentiment from property specialists and decision makers involved in London development activities. 245 industry professionals took part in the autumn 2018 edition, with almost 75% of respondents at director level or above and an average of 21 years’ industry experience.
The autumn 2018 LDB showed that 77% of respondents believe Brexit will have a negative impact on development activity. This is an improvement on the 80% who thought the same a year ago, but a dip from 73% six months ago.
Overall, the market sentiment across major indicators has followed a similar pattern: a slightly more negative outlook from six months ago, but not quite as bad as autumn 2017. One indicator has been the improvement in predictions for development activity levels, with a majority of 46% believing there will be less development activity in the next five years compared to 57% a year ago and 42% six months ago.
Broadly similar to the spring 2018 results, 36% of the respondents believe Brexit will have a negative impact on inward investment, with 51% believing there will either be an increase or no change. Almost 80% believe it will largely come from Asia in the next five years.
However, concerns about the impact of construction skills and capacity have grown, with a staggering 85% of the respondents believing it will have a negative impact on development in the next five years, increasing on an already-high of 78% last year, and 76% six months ago.
The industry has been consistent in its message to central and local governments; reform the planning system and increase funding levels. Improving the town planning process was again ranked as its highest priority to enable development activity and to an even greater extent than 2017, with 53% ranking it in their top two compared to 47% one year ago. It is ranked the top priority from respondents across the industry, including all types of developers, consultants, funders and contractors alike.
43% of respondents ranked funding for local authorities, infrastructure, transport and housing delivery in their top two, making it the second highest priority, as it was this time last year. Similarly, policies to support build to rent (BTR) and home ownership have consistently been ranked as the lowest priorities.
The industry however continues to be confident on market demand, particularly in the trajectory of BTR, affordable housing and senior living, for which an overwhelming 84%, 87% and 85% predict an increase in demand for these sectors in the next five years. Retail is the only market in which demand is expected to fall, for which confidence has halved between autumn 2017 and autumn 2018, from 41% to 78% now anticipating a decrease.
Gavin Kieran, director, M3 Consulting: “Irrespective of where one lands in the Brexit debate, more certainty would undoubtedly be welcomed. In the continued absence of that over the last year, the central and local governments have tinkered with funding and policies during that period, with the intention to enhance housing delivery, infrastructure and the post-Brexit landscape. Despite a slight uptick in confidence a few months ago, it seems that the industry is still holding its breath for practical, high impact, supply side measures that help enable development activity like improving the planning system and boosting investment.“