Last month, King & Wood Mallesons hosted Property Week's annual forecast dinner, attended by a broad range of industry experts.
The real estate industry will be shaped by numerous factors over the coming weeks and months, from a potential ‘Brexit’, to the UK’s ongoing housing crisis, to the London Mayoral election. Here, Real Estate partners Simon Ricketts, Steven Cowins and William Naunton share their top five takeaways from this year’s dinner.
The full Property Week article can be viewed here.
Brexit stage left
The prospect of Brexit brings myriad uncertainties, ranging from the future of passport arrangements to the very fate of the United Kingdom, should the SNP call for a new referendum on Scottish independence.
One thing is for sure: if we leave, the future prosperity of London as a market will rest upon successful trade negotiations, otherwise businesses that have set up their European platform in the UK are going to struggle. How vindictive our European partners will be during the course of the negotiations could depend on how hard we slam the door when we leave.
In recent years, we have taken for granted the property industry’s reasonably good relationship with local authorities, which has allowed big development schemes to get traction. There is a possibility that authorities will feel more defensive and constrained as a result of various government initiatives.
In London, despite the looming change of mayor, good backroom staff will still be in place and thinking creatively about ‘build-to-rent’ and other models like shared living, that will help to meet housing needs in London. There is an opportunity to break down the traditional planning-use classes so we can become more creative and efficient.
London is the deepest and most liquid real estate market in the world and investors are attracted to London as it is one of the easiest and safest places in which to invest. Chinese investors in particular have seen this potential, and with the volatility of the Chinese stock market and deregulation of the insurance industry, we are seeing an ever growing economy ready and willing to invest in London real estate. Capital flow from China to London has been steadily increasing over the last year and so long as opportunities remain attractive, this trend is likely to continue for the foreseeable future.
Fox in the henhouse
Over the coming year, we will see more division over the government’s attitude to affordable housing, particularly in London. We have seen the heavy hand of the government in steering ‘starter homes’, which removes the discretion from the hands of councils and developers in terms of the mix of affordable and market-priced housing. By introducing mandatory quotas for starter homes, we will see a reduction in the affordable homes allocation, and in London there is a very real risk that it won’t meet the needs of people who need a home.
One of the biggest challenges is the sheer quantity of money coming into the country and the sector. It has an effect on everything from yields to the pressures on the construction market, which mean that investors might find it hard to deploy capital as they wish. This is especially true for the value-add and opportunity funds. Tailoring property to generation Y could be a once-in-a-couple-of-generations opportunity, whether that is creating Tech City in Old Street or housing stock that will meet their needs.