After what we went through last year, who would feel confident predicting what will happen this year to the property industry? But hell, why not try?
Brexit, Trump, Italy … if 2016 has taught us anything, it is that attempting to predict the future can be a mug’s game. In which case I must be a mug, as I’ve been consulting with my crystal ball and trying to guess what might happen to the property industry in 2017.
Every day, we read contradictory reports over what to expect in the housing, development and construction industries, in everything from housebuilding to supply prices to major infrastructure projects. The range of “expert” views are fascinating. However, the collective message seems to be that we are not sure about the “known unknowns”, which is probably correct, and that we can expect any number of “unknown unknowns”. It could be interesting.
As a result of all the uncertainty following 2016, confidence in the delivery of housing supply is going to be a dominant theme over the next 12 months. We know we can expect to see the promised white paper early in the year, but throughout 2017, it’s likely that the government will become increasingly concerned about speeding up the process of supply and new home starts, when it has fully realised how challenging and slow this can be. This could get intense.
We know that new affordable housing supply will be across all tenures, not just low cost home ownership, and that there will be some additional funding available to build more homes. However, I also expect to see substantial speculative housebuilding by housing associations continue to be a dominant theme. In that context, further large housing association mergers can be expected. Mergers, though, are rarely straightforward; so the extent to which they detract from turbo-boosting new housing supply in the short term in favour of a promised increase in the future is likely to be a moot point.
At the same time, the welcome growth, if not explosion, of local authority housing companies may face a reality check in 2017. Many may well find that the process of land assembly, securing planning consent and delivering new homes is a good deal more complicated and time consuming than they first envisaged. If you mix all that up, add on top what I believe will be very modest house price growth and combine it with uncertainty for the future, I anticipate some caution from housebuilders and a resulting lag in supply.
Hopefully, funding and the appetite for development in the build-to-rent sector will continue to grow, but much will depend on funding streams remaining available. This will be down to the confidence of investors who may want to wait – both to see the success of schemes already in the development pipeline and the outcome of the Brexit negotiations. We must not allow Brexit to mean delay and cancellation. The uncertainty that lies ahead will act as a drag on development as we go through 2017.
The government is, and will continue to be, very active in putting its money on the table and seeking to stimulate supply, but the challenge is going to be getting the system – housebuilders, developers, local authorities and housing associations – to build at the speed that the government wants, and that the country needs.
The social and community benefits that can result from well planned and well executed estate regeneration schemes, along with a net increase in housing supply, will see national and local government promote the new national strategy and new individual projects. However, whether sufficient value can be delivered, given the limited amount of funding allocated to this programme, will determine just how many are able to proceed. Expect a year of planning and mixed community and political reactions. Development and growth will only happen in later years.
The support for local infrastructure investment to unlock housing sites is very encouraging. I fear we will see modest progress in the year but hope that resources will be allocated rapidly to “oven ready” schemes. I hope that housebuilders and others will get on with their housing construction works alongside the infrastructure investment, rather than wait for these enabling works to be completed. We need to aim for sophisticated, time-focused and outcome-driven project management rather than classic sequential approaches that lock in delay.
As far as most large-scale infrastructure projects are concerned – HS2, Hinkley Point and others – 2017 needs to be the year when major construction works get under way and when clarity emerges about construction timetables and impacts. This could happen. However, if we mix all this in with other development and construction investment in the pipeline – across the public and private sectors, in commercial, residential and infrastructure – there is a real test for the construction industry in 2017. Industry has to continue to innovate, to develop and deliver modern methods of construction, to continue to grow its own skills base and to address the extent to which it is reliant on imports, given the potential for higher costs following the Brexit decision. We may well see the housing sector lead the way. However, I suspect much will rely on the decisions, leadership and targeted investment of the Homes and Communities Agency; particularly when it comes to modular housing.
We must not allow Brexit to mean delay and cancellation. The uncertainty that lies ahead will, I fear, act as a drag on development as we go through 2017. This may be inevitable as we navigate our country through this unique time, but the levels of demand across the UK remain acute and must be used to sustain confidence and investment in new homes, new buildings, new places and the critical underpinning of both national and local infrastructure projects.
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