London Development Barometer

Summary of results - London Development Barometer - Autumn 2018

14 December 2018

M3 Consulting’s London Development Barometer (LDB) was launched in autumn 2017 to compile a snapshot of market sentiment from property specialists and decision makers involved in London development activities. The London development industry has been subjected to significant geopolitical, social and economic changes over the last year as it grappled with ongoing Brexit negotiations, the fast approaching withdrawal deadline and domestic policy changes including those announced at the two autumn budgets and the spring statement.

There have been further announcements throughout the year from central and local governments in the midst of a housing crisis, including the launch of the London Plan from Mayor Sadiq Khan and reviews into the National Planning Policy Framework and MP Oliver Letwin’s review into build out rates. The Autumn 2018 LDB aims to uncover whether and how these and other prevailing factors have influenced the industry’s views and outlook.

Results overview and key messages

While industry sentiment showed some very cautious optimism six months ago, it has not undergone a seismic shift over the last year. Despite funding announcements and proposed and enacted policy changes, more than 8 in 10 in the industry continue to believe that the government is not doing enough to help enable London development activity. Nevertheless, the industry is feeling slightly, although not significantly, more confident about anticipated development activity levels in the next five years.

The industry’s message to government has remained clear– improvements to town planning policy and funding for local authorities, infrastructure, transport and housing delivery are needed to boost London development activity levels.

Summary of the respondents
  • 245 responses, with a 100% completion rate

  • 74% 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 55% of the respondents, with 45% from large companies (251+ staff)

Summary of findings

LDB autumn2018 infographic web

Key findings

1.  The industry remains sceptical of London development activity over the next five years, with 46% predicting a drop in activity levels, compared to 42% from six months ago.

  • It is, however, more optimistic than a year ago, when 57% believed there will be less or significantly less activity. 
  • Similarly, 29% of respondents predict more development, an increase of 10% from Autumn 2017, but 4% down from six months ago.

2. Dissatisfaction with central and local government action to help enable development remains at 82% compared to six months ago, a slight improvement on the 86% who believed the same a year ago.

3. In the last year, the industry has grown even more concerned about construction skills and capacity, with a staggering 85% of the respondents believing that this issue will have negative or significant negative impact on London development activities.
This is the industry’s primary concern, overtaking Brexit itself six months ago.

  • As the number two concern, the industry is still worried about Brexit itself, fluctuating from the 80% who thought it would have a negative or significant negative impact a year ago, to 73% in the spring, and 77% just after the autumn 2018 budget announcements.

4. In line with previous surveys, more than 75% of respondents believe the cost of finance will increase, while a majority of respondents (42%) believe there will be no change in the availability of finance.

  • While a clear majority of the respondents still believe financing will have a negative impact on London development activity, those who believe that it will have no impact has steadily increased to 31.4%.

5. Improving town planning policy is still the industry’s top priority and to a greater extent than 2017. The same percentage (32%) of respondents cited it as their top priority while 53% ranked it in their top two compared to 47% one year ago.

  • Moreover, while segments of the industry have ranked other issues in varying order, every segment including developers, contractors, funders and consultants have all cited improving town planning policy as the top priority.
  • Funding for local authorities, infrastructure, transport and housing delivery remains the industry’s second highest priority and has been since Autumn 2017. 19% ranked it as their top priority, and 43% placed it in their top two. These reflect less than 2 percent change over the course of the year.
  • As the third priority, the industry seems less concerned about the impact of land supply, with 55% believing it will negatively impact development activity compared to 66% in autumn 2017.
  • Supporting home ownership policies and promoting build to rent policies remain the lowest ranked priorities, with 14% and 13% citing them in their top two respectively.

6. The industry continues to be generally confident with market demand, with:

  • 87% predicting an increase in demand for affordable and council compared to 80% one year ago.
  • 84% predicted an increase in demand for Build to Rent, an increase of 7% from six months go but down 4% from one year ago.
  • 85% predicting an increase in demand for senior living development, a category introduced for this survey following demand from previous survey respondents.

7. Confidence in the retail market however is on a steep decline, with 78% expecting a decrease in market demand compared to 41% in Autumn 2017. That figure was at 61% in Spring 2018. It is the only market in which more people anticipate a decrease in demand.

  • Level in confidence for other markets remain on balance positive, albeit slightly less so.

8. The industry’s opinion on overseas investment has not changed much over the last six months, with just over 50% predicting more investment or no change in overseas investment volumes in the next five years, with nearly 80% of the industry expecting a majority of the inward investment to come from Asia.

9. Although still positive, the industry is less confident about the positive impact of Crossrail than it was one year ago. 83% predicted a positive impact in Autumn 2017 compared to 77% in Autumn 2018.

  • Respondents who believe Mayoral policies will have a positive impact has also experienced a downward trend, slipping from 52% in autumn 2017 to 50% in spring 2018, to the current level at 45%.