The majority of London-based developers think the outlook for London’s property sector is bleak, with many citing lower levels of development activity and unhelpful government policy.
According to M3 Consulting’s London Development Barometer, 42% of the industry anticipates lower levels of development activity over the next five years and 82% believe governments at a local and central level are not doing enough to enable development.
The figures are up from six months ago, when they stood at 57% and 86% respectively, yet still paint an overall picture of concern.
The survey of 235 industry professionals found that while 33% are 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 have 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, while calls for further stamp duty amendments grew in support.
Overall, 82% and 65% of the respondents expect Crossrail 2 and government investment, respectively, to have a positive impact on London development activities.
When asked about Brexit, 72.5% of developers said they believe it will have a negative impact on development in the capital, down from 80% in autumn 2017.
In contrast, just over half (53%) of respondents believe Brexit will have either no impact on or lead to more inward investment from overseas. Of the latter, 76% believe investment will largely come from Asia, while only 15% believe it will come primarily from the Middle East.
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.
The construction skills shortage remains a top concern for the industry, with 76% of respondents believing it will negatively impact London development activities over the next five years.
Although 59% of respondents believe changes in the cost and availability of finance will have a negative impact, the figure is down from 66% six months ago.
Gavin Kieran, director at M3 Consulting, said the survey suggests 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,” Kieran said.
DealMakerz thinks that while developers are a bit more positive than six months ago, the survey makes for pretty bleak reading.
It’s clear that government initiatives – or the lack of them – will prove to be a deciding factor in how the sector fares over the next five to 10 years.