London Development Barometer


Summary of results - London Development Barometer - Spring 2018

15 June 2018

The London Development Barometer was first launched in Autumn 2017 to compile a snapshot of market sentiment from property specialists and decision makers involved in London development activities. The Spring edition aims to explore how attitudes amongst the industry have changed in this six month period, as it adjusts to shifting political, economic and social influences and events.


Results overview and key messages

The inaugural London Development Barometer in Autumn 2017 painted a picture of concern, with key figures that includes 57% of the respondents believing there will be less development activity in the next five years, and 86% of the respondents believing the government was not doing enough to help enable development. However, the industry was practical in its response: showing positivity towards proposed initiatives like Crossrail2 and the health of market demand, and prioritising town planning and government funding in the face of economic and political instability.

The spring edition of the London Development Barometer charted a slightly more positive view across key indicators such as anticipated development levels, market demand and cost and availability of finance. A logical interpretation of this might suggest that the industry feels greater certainty now that the dust is settling from the snap election, and Brexit negotiations that appear to be underway. Or it could just be that the widely anticipated catastrophic fallout has not happened (yet), buoyed by continued overseas investment and the devalued pound sterling.

By and large, however, the industry remains overwhelmingly unconvinced by government action and the impact of Brexit, and a majority still believe that there will be less development activity in London in the next five years.

Summary of the respondents
  • 235 responses, with a 100% completion rate
  • 69.5% of the respondents were senior figures at their organisations
  • Representation came from organisations involved in a range of sectors
  • SMEs (up to 250 staff) account for 56% of the respondents, with 44% from large companies (251+ staff)%

Summary of findings

Spring LDB final infographic crop web

Key findings:

  • 42% believe there will be less development activity over the next five years versus 33% who think there will be more.
    • While a negative outlook overall, this reflects a drastic movement from 57% versus 19% respectively six months ago.
  • 53% of the respondents believe that Brexit will either have no impact on, or lead to more inward investment from overseas, with 76% believing it will largely come from Asian investors. However 37% believe the volume of overseas investment will go down.
  • Improving town planning policies remains the industry’s top priority for enabling London development activity, with 37% citing it as their top priority, 61% placing it in their top 2, and 72% placing it in their top 3. By comparison, the next highest priority is funding for local authorities, infrastructure, transport and delivery, with 18% citing it as their top priority, 38% placing it in their top 2, and 56% placing it in their top 3.
    • Improving town planning policies and funding for local authorities, infrastructure, transport and delivery were also the top 2 priorities in Autumn 2017 results. However, with 47% citing the former and 44% citing the latter in their top 2 six months ago, the gap between the two has widened.
  • More than three-quarters (76.3%) of the respondents agree that construction skills and capacity will have a negative or significant negative impact on the London development activity in the next five years, slightly more than the 72.5% believe the same for Brexit.
    • Generally the industry is slightly more optimistic than six months ago, with 80% that saw Brexit has having a negative or significant negative impact and 78% that believe the same for construction skills and capacity.
    • The concern for the potential negative impact of construction skills and capacity still does not translate to prioritising investing in and promoting development of construction skills and new methods of construction, as this remains 5th out of 7 on the list.
  • 82% of the respondents believe that the central and local governments are not doing enough to enable London development activity, 11% of whom believe they are discouraging it.
    • This is slightly improved from six months ago, when 86% believed that they are not doing enough, of which 11% who thought were discouraging development activity in London.
  • The industry remains positive about market demand, with more respondents believing there will be an increase or significant increase in demand for all sectors except retail.
    • 61% of the respondents anticipate a decrease in the demand for retail compared to 41% six months ago
    • Confidence in market demand for office has shifted from divided opinion to 45% who believe it will increase versus 27% who believe there will be a decrease.
    • While still overwhelmingly positive, confidence in demand for infrastructure has dipped with 72% believing there will be an increase in demand, compared to 82% six months ago.
  • Confidence for demand in all housing sectors remain high.
    • 81% believe there will be an increase in demand for Affordable / Council Housing, similar to six months ago (80%)
    • Build to rent remains high, with 77% believing there will be an increase in market demand, although down from 88% six months ago.
    • Confidence in the market demand for residential sales appears to have risen, with 50% expecting and increase compared to 45% six months ago.
  • The industry is still positive about the potential impact of Crossrail 2 and government investment, with 82% and 65% believing these will have a positive or significant positive impact on London development activity over the next 5 years. Accordingly, funding for local authorities, infrastructure, transport and delivery places second on the list of priorities.

 

Other findings

  • Respondents are slightly more optimistic in the Spring edition about the cost and availability of finance than they were in the November edition although 74% still think the cost of finance will increase. Despite 59% respondents believing the changes (cost and availability) to finance will have a negative impact on development levels; this is 7% lower than that of the Autumn edition.
  • 33% identified further stamp duty amendments as a top two priority, compared to 30% in the November edition. Over half of respondents also believe stamp duty will have a negative impact on development activity.