x
By using this website, you agree to our use of cookies to enhance your experience.

TODAY'S OTHER NEWS

London developers lack faith in Brexit extension solving anything

The London development industry is unconvinced that the latest Brexit extension will help solve the current impasse in the House of Commons.

According to the spring 2019 edition of the bi-annual London Development Barometer (LDB) survey by M3 Consulting - taken in mid-April to provide a snapshot of market sentiment just after the announcement of the latest Brexit extension - 48% of respondents do not believe it will lead to a better deal while only 36% do. Meanwhile, 16% said they did not know what impact the latest Brexit delay would have on pushing a deal over the line. 

A clear majority of nearly six in 10, however, agreed that the ongoing uncertainty surrounding Brexit will have a negative impact on development activity over the next five years, compared to only 15% who believe it will have a positive effect.

Advertisement

Despite all that has happened with Brexit since the autumn 2018 LDB six months ago – with Theresa May’s Withdrawal Agreement defeated three times in Parliament, and a number of delays to Britain’s proposed departure date - key indicators suggest that the impact of it is not anticipated to be ‘overwhelmingly prohibitive’.

Although 43% of respondents believe London development activity will fall over the next five years, this is still a marginal improvement on the 46% recorded six months ago, and a marked improvement over the 57% who thought the same in the first edition of the LDB in autumn 2017. 

What’s more, 32% of respondents now believe there will be greater levels of development activity in the capital, compared to 29% six months ago, and 19% in autumn 2017.

The survey also found that the development industry remains confident about foreign investment levels, with 64% anticipating that they will stay the same or rise after Brexit, up 13% from six months ago. Meanwhile, it’s Asia which is predicted by 74% to be the main source of inward overseas investment.

Furthermore, the industry is now slightly more optimistic when it comes to development finance, with 65% of respondents predicting an increase in the cost of finance compared to three quarters (75%) six months ago. Equally, 37% now believe there will be an increase in availability of finance, compared to 30% six months ago.

While confidence in market demand for every sector except retail remains positive on balance, the percentage of respondents predicting growth in several markets has declined compared to six months ago. These include affordable/council housing (down 13%), infrastructure (down 12%), Build to Rent (down 9%) and hotel and leisure (down 7%). 

However, confidence in offices improved, with nearly half (49%) of respondents expecting an increase in demand compared to 39% six months ago, while the senior living sector has taken over at the top, with some 84% foreseeing an increase. The industry, though, is undecided on residential sales, with 41% predicting an increase compared to 38% expecting a decrease.

In spite of a number of notable policy and funding announcements among the Brexit debate since autumn 2018, from both the government and the Mayor of London, the level of dissatisfaction with central and local governments nevertheless remains very high, with 83% of respondents believing central and local governments are not doing enough to encourage development activity in the capital. In fact, 17% of respondents believe central and local governments are actively discouraging development activity.

Confidence in the impact of mayoral policies on London development activity has, in particular, sharply fallen, with just 35% believing Sadiq Khan’s policies will have a positive impact, down from 45% six months ago and 52% in 2017.

As a result, 42% now believe mayoral policies will have a negative impact, compared to 32% six months ago. 

Optimism regarding town planning policies has also steadily declined, with 34% now believing they will have a positive impact and 44% believing they will have a negative impact, compared to 48% and 42% respectively in autumn 2017. 

There also continues to be concerns about construction skills and capacity and construction cost, with 79% and 68% of respondents respectively believing these will have a negative effect on development activity in the capital.

Despite the industry remaining most confident about the impact of Crossrail 2 and government investment, confidence in these two areas has also fallen, with 68% and 55% of respondents respectively anticipating a positive impact compared to 77% and 63% six months ago.

As has been the case since autumn 2017, improvements to the town planning process and funding for local authorities, infrastructure, transport and housing delivery are the industry’s two main priorities. Ranking only in third place, and just above amendments to stamp duty policies, is mitigation of the post-Brexit transition period, while policies to support Build to Rent and home ownership are the industry’s lowest priorities, as has been the case consistently since the survey began.

The twice-yearly LDB was launched by M3 Consulting in the autumn of 2017 to track the changes in market sentiment from property specialists and decision makers involved in London development activities. In the spring 2019 edition, 229 industry professionals took part, with nearly 65% of respondents at director level or above and an average of 21 years’ industry experience.

“The industry has had no illusion that Brexit would have anything other than a negative impact on London development activity, and the message to policymakers amidst of Brexit uncertainty has been consistent: improve town planning policies and invest in the built environment,” Gavin Kieran, director at M3 Consulting, commented. 

“These results show however that while the industry is still buoyed by general optimism in regards to market demand, the prolonged lack of progress on all three fronts may be taking their toll.”

icon

Please login to comment

MovePal MovePal MovePal
sign up