As Brexit looms, a new survey commissioned by Crowe UK identifies the biggest concerns facing the UK property industry and provides a unique snapshot of views across the sector.
Crowe’s survey, which asks property developers and investors across the country for their views on the state of the market in 2018 and outlook for the future, reveals UK businesses are increasingly concerned about the impact the current political and economic uncertainty will have on the industry.
Brexit: reality bites
With daily headlines and speculation about the country’s preferred vision, it comes as no surprise that Brexit negotiations and the ultimate shape of the UK’s departure from the European Union is now the greatest concern to the industry.
With Brexit potentially impacting upon the British property market, and its subsequent attractiveness to foreign investors, 44% of respondents would prefer a soft Brexit, with 37% preferring no Brexit at all.
Despite these uncertainties, businesses in the property and construction industry remain confident in their growth plans and trajectory. In the next 12 months 62% of participants were positive about their business growth. Meanwhile 60% of participants currently have little or no difficulty obtaining funding, with 36% suggesting access to funding has improved compared to 24% last year.
Government policy and priorities
For the fifth consecutive year, respondents highlighted the current UK tax system as unfavourable for developers and investors, with more than 82% identifying Stamp Duty Land Tax (SDLT) as the biggest tax barrier to business growth.
In addition, 77% of respondents highlighted that the Green Belt protections were not conducive to solving the housing crisis.
Impact of technology
Emerging technologies are reshaping the property and construction market, posing an opportunity and a threat to those within the industry. Respondents identified retail (39%) and office space (29%) as the two property types most likely to be impacted by advancing technological trends and cited Modern Methods of Construction as the next big thing to impact the sector, followed by AI (18%) and Big Data (13%).
London vs national
This year’s survey shows that growth in the London market is still stifled by uncertainty and SDLT. In response, and with the introduction of Crossrail, the wider South East area was identified by this year’s respondents as having the greatest potential for investment, with buyers seeking cheaper alternatives within a commutable distance from the capital.
Birmingham and the West Midlands were also touted as a prime area of investment over the next 12 months, with the region set to benefit from the HS2 high-speed rail project reducing journey time between Birmingham and London to 49 minutes.
Stacy Eden, Head of Property and Construction at Crowe UK, comments: “Even with the addition of the government’s newly released guidance on preparing for a no deal scenario, there are still many issues that cannot yet be addressed and remain as Brexit’s ‘fiscal unknowns’. These ‘fiscal unknowns’ are causing the biggest headache for the property industry, and are likely to hit competition and reduce the UK’s attractiveness in the eyes of foreign investors.
If Britain loses its free access to the single market there is a worry that this could rapidly change the UK’s status as a commercial gateway to the rest of Europe, with consequences for both occupier and property investment markets.
Low growth has been experienced in parts of the property sector with our findings suggesting that the greatest impact will be felt in the retail regional market, followed by the London residential market. Brexit and economic uncertainty, SDLT, the rise of e-commerce, business rates and national living wage could be attributed to this low growth.
On housing, the issues identified by the market remain the same as ever. SDLT and Green Belt complaints are not new, so it is worrisome that successive Housing Ministers have failed to take meaningful action here. The Chancellor’s 2018 Budget acknowledged that the housing market needs to be fixed. The announcement of extended support for first-time buyers to help them get on the housing ladder and encourage development is positive, but there can be significant negative consequences in terms of just boosting prices for certain types of new builds leading to negative equity in the future.”