Gloom & Brexit - London Real Estate Forum 2016 Day One
14 Jun 2016
What a difference a year makes. At last years London Real Estate Forum there was a surge of optimism after the decisive election result. It was a little over a month since the Conservative party had won an outright majority that should have paved the way for five years of stability and planned government.
Twelve months later, and largely thanks to the mismanagement of the EU negotiations and the Brexit vote, Cameron and Osborne might be looking for new jobs. We could be back to the polling booths for a snap general election by the end of the year - and we could be negotiating our way out of the European Union.
The keynote panel on day one of the London Real Estate Forum was lead by Chris Giles of the FT. He gave a very balanced assessment of the risks and opportunities that Brexit would offer. The conclusion was that the risks are far greater, the opportunities unknown. A straw poll of the room was 100% Remain or Undecided. The property industry appears to be wholeheartedly in favour of remaining.
In just over a week we will know the outcome of the poll, but either way the future seems to be uncertain. For many the Brexit issue is taking the blame for the slowdown that we are experiencing, but whether we leave or remain there are underlying issues that threaten the economy of London. Some are global – the Chinese economy, oil prices, The US election, general political instability across the middle east and Northern Africa. But some are local - a new London Mayor, rising construction costs, vocal local opposition to planning and development to name a few.
Looking at those local issues in more detail:
- Construction inflation, driven largely by the supply chain and shortage of quality subcontractors and skilled workers, is a problem that will inevitably self correct once the current feeding frenzy dies down and contractors need to compete for work again.
- The new Labour Mayor, Sadiq Khan, has already started to redefine his manifesto pledges. Khan must realise that the delivery of affordable housing will grind to a halt if the economy slows and developers stop investing.
- The much vaunted Tory localism policy is beginning to work, (unless you are a developer), basements, towers, in fact almost any form of development is more often than not met with a chorus of disapproval that seems to fill the pages of the Evening Standard. Perhaps this is because we have reached a turning point in the development cycle, the redevelopments that really needed to happen have been done, and the sites and redevelopments we are now looking at are more marginal, complex and controversial.
The Remain vote is a call for stability, but I do wonder whether we are already in the storm, and voting out will just throw the paddles away.