The last six months has seen the London development industry formulate a more optimistic outlook on the future of development in the capital, according to the London Development Barometer. The overall picture, however, remains one of concern.
London-based development manager M3 Consulting launched the London Development Barometer in autumn 2017, which revealed subdued forecasts and a damning indictment of government, with 57% of the industry anticipating lower levels of development activity over the next five years and 86% believing that governments at a local and central level were not doing enough to enable development. Six months on, the figures stand at 42% and 82% respectively.
235 industry professionals took part in the 2018 spring edition of the London Development Barometer, which is designed to provide a snapshot of industry sentiment from property specialists and decision makers involved in London development activities. 69.5% of respondents were in senior positions at their respective organisations.
Whilst the spring edition has charted a slightly more optimistic view across key indicators, notably with 33% predicting an increase in development activity over the next five years compared to just 19% last autumn, the industry remains overwhelmingly unconvinced by government action and the potential outcomes from Brexit.
The last six months has seen the industry repeat its calls for local and central governments to improve town planning policies, which again ranks as the top priority when it comes to enabling activity; 61% placed it in their top two, representing a 14% increase since autumn last year. Increased funding for local authorities, infrastructure and transport again came in as the second highest ranking priority, with a smaller share of the vote, whilst calls for further stamp duty amendments grew in support. In this context, 82% and 65% of the respondents expect Crossrail 2 and government investment, respectively, to have a positive impact on London development activities.
The findings on Brexit paint a mixed picture. Almost three quarters of respondents (72.5%) believe Brexit will have a negative impact on development in the capital, yet this figure has dropped from 80% in autumn 2017. Moreover, a majority (53%) of respondents believe Brexit will have either no impact on, or lead to more inward investment from overseas. 76% believe it will largely come from Asia, while only 15% believe it will come primarily from the Middle East.
Construction skills shortage remains a prevalent concern for the industry, with 76% of the respondents believing that it will negatively impact London development activities over the next five years; however, investing in and promoting the development of construction skills and new methods of construction remains fifth out of seven priorities listed in the survey, ahead of supporting build to rent and retaining policies that support home ownership.
In line with the autumn 2017 results, attitudes towards market demand represent a break from a largely negative outlook. Respondents believe there will be an increase in demand for all sectors except retail. Confidence in housing remains high with 81% and 77% predicting an increase in demand for Affordable/Council housing and Build to Rent respectively, despite a drop of 11% for the latter from six months ago.
Despite 59% of respondents believing the changes in the cost and availability of finance will have a negative impact, this figure was at 66% six months ago.
Gavin Kieran, director, M3 Consulting, said, “It seems that the industry has processed and adjusted to the political and economic shake ups of the last two years. It is shifting into a more optimistic outlook with cautious overtones, while the pragmatism remains. It continues to call for more action from central and local governments on matters directly under their control that could enable development activity: town planning processes, funding, and stamp duty policies.”
In terms of industry breakdown of respondents, SMEs (up to 250 staff) accounted for 56% of respondents, with 44% from large companies (251+ staff). There was an average of over 19 years of experience and representation from all major property submarkets, including residential sales, build to rent, offices, retail, student accommodation and hotels.