The property sector in the UK is showing resilience in the face of a tumultuous year, with confidence in the residential sector the strongest, according to new research.
Indeed, some 74% of senior executives in the in the property and construction industries surveyed by investment management and tax group Smith & Williamson regard residential property as a strong five year investment, a 10% rise from 2015.
The survey also shows that 62% are confident in the outlook for the residential sector whilst over half, some 54%, had confidence in the commercial sector.
Jacqueline Oakes, chair of the property and construction group at Smith & Williamson, said that in the face of stamp duty changes, new tax rules for buy to let and the Brexit vote the firm had expected a fall in confidence.
‘The resilience shown is encouraging and the industry appears to be cautiously optimistic about its future prospects. A growing population, the devaluation of the pound making the UK attractive for overseas residential investors, coupled with the British desire to get on the property ladder and a chronic shortage of housing in many areas, has led residential property to be seen as a shock-proof area to invest in,’ she explained.
Looking ahead some 60% of survey respondents identified planning as either the first or the second most important issue facing the UK property and construction sector over the next five years. They believe that a relaxation of planning regulations is the policy initiative that would have the greatest positive impact on the sector.
‘Planning departments have been badly affected by budget cuts to local councils in recent years, client feedback has indicated that these cuts have resulted in a decline in the number of initial approvals granted and the speed of response has hindered development,’ Oakes said.
‘To encourage growth, local authorities need to be properly resourced, with clear remits. Councils should be given guidance and allowed to borrow more to fund the development of property, overcoming one of the hurdles in the housing shortage problem,’ she added.
The annual survey report also points out that Brexit does not yet appear to have had a direct impact on the day to day running of the property and construction sector. Only 29% of respondents have put key business decisions on hold and, of them, only 30% will wait longer than a year before deciding.
‘Our survey indicates that those who make the decisions are very pragmatic and if a decision needs to be made, they will make it. However, the decision to leave the EU has created uncertainty and many are worried about access to the single market, the freedom of movement and wider business activity,’ Oakes explained.
Some 55% of the respondents expect the vote to leave the EU will have a negative impact and 57% viewed a decision on access to the single market as critical to their business. Only 27% of respondents thought that the vote to leave the EU would have a positive impact on the industry.
Considering the reliance the construction industry has on migrant labour and the importation of raw materials, it is surprising that these numbers are not more extreme, according to Oakes and the report also says that 86% are positive about their own business future and are aiming to grow their business in the next three years. ‘However, it may be a case that Brexit has not yet begun to bite and results next year may reflect an increasingly negative mood,’ she added.
However, in central and Greater London there is less optimism. Whilst still positive, there were large drops in optimism for the London property sector with Greater London declining by eight points to 78% and central London down 15 points to 65%. But confidence in the South East property market remained strong at 84%.
‘There is a lot of uncertainty surrounding London property; tax changes have really begun to hurt prime central London property while Brexit insecurity has affected the investment potential of some Greater London property. The South East has been able to weather that storm by offering a relatively more affordable area, within commuting distance of London and high quality infrastructure,’ Oakes concluded.