London development industry continues to bemoan government inaction

The property and development industry in London remains unimpressed with central and local government when it comes to enabling development activity.

That’s according to the London Development Barometer (LDB), a survey which revealed that 82% of the industry believes not enough is being done.

Although this is a slight improvement on the 86% who said the same 12 months ago, it is against a background of substantial proposed and enacted policy announcements. These include an overhaul of the National Planning Policy Framework, an update of the Mayor’s London Plan, a revamp of stamp duty rates, and a range of policies to boost home ownership, social housing and infrastructure spending

The LDB – a bi-annual survey 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 – was most recently run in autumn 2018, with 245 industry professionals taking part. Nearly 75% of respondents were at director level or above and with an average of 21 years’ industry experience.

The latest survey found that 77% of respondents believe Brexit will have a negative impact on development activity. While this was an improvement on the 80% who thought the same a year ago, it represented a dip from 73% six months ago.

Overall, the market sentiment across major indicators has followed a similar pattern - not quite as bad as autumn 2017, but a slightly more negative outlook from six months ago.

Some 36% of respondents believe Brexit will have a negative impact on inward investment, with 51% believing there will either be an increase or no change. Nearly 80% say it will largely come from Asia in the next five years.

Elsewhere, concerns about the impact of construction skills and capacity have grown, with 85% of those surveyed believing it will have a negative impact on development in the next five years, rising from an already-high 78% last year, and 76% six months ago.

The data also highlighted again the consistent message the development industry has sought to get across to central and local governments – namely reforming the planning system and increasing funding levels. The industry ranked improving the town planning process as its highest priority to enable development activity, with 53% placing in it their top two compared to 47% a year ago. It’s a top priority for those from across the industry, including all types of funders, contractors, consultants and developers.

The second highest priority, as it was last year, was funding local authorities, infrastructure, transport and housing, with 43% ranking it in their top two. On the other hand, policies to support Build to Rent (BTR) and home ownership have consistently been ranked as the lowest priorities.

According to the findings, the development industry continues to be confident when it comes to market demand, especially in the trajectory of BTR, affordable housing and senior living. An overwhelming 84%, 87% and 85% predict a rise in demand for these sectors in the next five years.

Retail, by contrast, is the only market in which demand is expected to fall, with confidence halved between autumn 2017 and autumn 2018, up from 41% anticipating a decrease to 78% now.

“Irrespective of where one lands in the Brexit debate, more certainty would undoubtedly be welcomed,” Gavin Kieran, director at M3 Consulting, said.

“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.”