Labour wants more development. Will local councils allow it?
Making sense of the latest trends in property and economics from around the globe
5 minutes to read
"Invest, invest, invest," will be the theme of this month's Budget, chancellor Rachel Reeves told the Financial Times last week. The slogan is rich in irony given the persistent warnings of fiscal black holes that have prompted everyone from homebuyers to institutional investors to put plans on ice.
Granted, Reeves was largely talking about the degree to which she can borrow to invest public money, but uncertainty is unquestionably weighing on private investment. We'll never know about the vast majority of deals that don't get done, but there are other clues. Declines in business and consumer confidence prompted investors to pull a net £666 million out of UK stock funds last month. After an early 2024 recovery, the FTSE 100 share index is now trading at a 46% valuation discount to Wall Street's S&P 500, almost the widest on record, according to Reuters.
Uncertainty reigns in the UK's prime property markets, too - see Tom Bill's piece published on Monday. The number of offers made in the three months to September in London was 10% below the five-year average (excluding 2020), Knight Frank data shows. In the more discretionary £10 million-plus market, there was a 22% decline in the number of deals done in the year to July.
We may see a sizeable relief rally through November and beyond as the government opts against implementing some of its more severe tax plans. Ministers appear prepared to take a lighter option when it comes to non doms, for example. Preparing the country for the worst before having us all walk away happy while the tax burden is at its highest for 70 years would be clever politics, but it's a high-risk strategy. Budgets have morphed into the ultimate test of economic competence in the post-Truss era; let's hope they pass.
Ongoing pressures
Structural shortages of purpose-built student accommodation (PBSA) in key cities are fuelling rental and valuation growth in Unite's portfolio, the company said in a trading update yesterday.
The company expects to see rental growth of 8.2% in the 2024/25 academic year, and another 4-5% in 2025/26. Occupancy is running at 97.5%. The value of the group's UK Student Accommodation Fund and London Student Accommodation Joint Venture have climbed 4.4% and 5.3% so far this year.
Just 258,000 new purpose-built student accommodation (PBSA) beds have been added across the UK since 2012. Over that same period, almost 470,000 full-time students have joined the student population. Different markets are seeing varying levels of new supply, and of student
number growth, but at a headline level such disparity points to ongoing pressure on an already undersupplied market, which is driving investment to the sector. It's also putting the quality and value of accommodation under the spotlight - for more on that, and a more detailed update on the market, check out Knight Frank's new Student Accommodation Survey.
'Grey belt' tests
A £750 million film studio development on the outskirts of London could be the first real test of Labour's green belt policies, I wrote back in August. Buckinghamshire Council threw out the application from Marlow Film Studios back in May, but the company announced in August that it would appeal to the Planning Inspectorate.
The site is a former quarry and landfill adjacent to the A404. Opponents of the project say the site is "a valuable wildlife-rich habitat, supporting multiple protected and endangered species." The developers describe it as a "despoiled former landfill site," currently "unusable for domestic buildings or agriculture". Is this the sort of lower-quality "grey belt" land that the government wants developed? We're going to find out - the government has decided to "call in" the decision, meaning ministers will have the final say.
Labour's relationship with councils will undoubtedly be tested over the coming months as its pro-development stance touches the realities of local planning. The Telegraph took a deep dive into Hammersmith and Fulham's position on converting offices into homes on Monday with the help of data analysis from Knight Frank's Anna Ward.
The Labour-led council has refused 10 such projects so far this year, which would have collectively delivered 282 homes, according to Knight Frank. It has approved eight office conversions, but these are far smaller and will deliver just 30 homes. Hammersmith accounted for half of all the rejections of large office block conversions in London over the last six months.
Flatlining
The market for farmland virtually flatlined in the third quarter of 2024, according to the latest results from the Knight Frank Farmland Index, which tracks the value of bare agricultural land in England and Wales.
Average values edged up by a fraction of a percent – the equivalent of just £16/acre – to hit £9,351/acre. Although this represents another record high for the index it also appears to mark the end of a bull run that started at the beginning of 2021 and has seen farmland rise in value by over a third.
Price growth peaked at the end of the second quarter in 2022 when the annual increase hit 16% and the three month figure alone was 4%. Since then, however, the market has slowly been losing its exuberance. July’s earlier-than-expected general election put a damper on the peak summer selling season, which was just getting into gear after the extremely wet spring delayed the sale of some farms and estates. See the index for more.
In other news...
Landlords await more clarity on renters rights bill, writes Tom Bill.
Luxury London office portfolio comes to market in potential £400mn deal (FT), Vistry on "issues have that arisen within the Group's South Division" (Trading Update), ‘HS2 light’ may replace scrapped line after Birmingham (Times), and finally, global emissions have likely peaked (Bloomberg).