“When planning rules mean you can’t build any houses, that is both a wrecker of dreams and a blockage on our national potential.”
Writing in Inside Housing last week, Keir Starmer summed up the issue that all of us who work in real estate are extremely aware of.
As Prime Minister Rishi Sunak launched the 2024 General Election campaign on a rainy afternoon outside Downing Street on 22nd May, he spoke of his party’s readiness to lead Britain to recovery, with the weather seemingly as unconvinced as his audience.
The polls put Starmer and Labour some 22% ahead of the Conservatives, and we are now readying ourselves for a new Government.
When I speak to industry peers, there is optimism, but it is heavily qualified. The fundamentals should be set for growth with inflation seemingly having peaked and interest rates doing the same.
There are huge questions about public spending, and there is no doubt that the new Government will need to raise funds, but we are beginning to see markets recalibrate and show signs of stabilising. We know that there are market cycles in real estate, and this cycle will bring opportunities just as previous cycles have.
Labour has recognised the need for progress on issues impacting the built environment. They aim to increase supply and long-term affordability.
Starmer claimed: “A Labour government would immediately update the National Policy Planning Framework.”
The focus will be on so-called ‘grey belt’ land currently registered as green belt but made up of disused carparks and dreary wasteland that will now be available for development. To do this, development costs need to reduce and borrowing needs to be affordable.
This takes us to interest rates. Unsurprisingly for a General Election period, the Bank of England maintained base rates at 5.25%, its highest level in 16 years.
However, a number of the larger banks reduced their rates since that announcement and a base rate reduction in August seems extremely likely. Stability and a clear direction of travel are what the general public, as well as commercial investors, need.
Labour’s policies do eat into traditional bank margins, which will inevitably keep rates higher. The party has mooted shielding homeowners with longer-term mortgages and bringing back face-to-face banking, both of which will eat margins and drive up costs.The Freedom to Buy scheme, the policy to help more Britons onto the housing ladder, is also unlikely to herald a new profit boon for banks and could make lending more expensive.
But there are positives.
There are considerable opportunities for large-scale development and the living sectors.
Labour has committed to constructing 1.5 million homes during the next Parliamentary term, delivered through a new generation of towns across the UK, implementing a housing recovery plan, and giving planning powers to local mayors.
The last initiative is particularly relevant as approved planning applications declined by as much as 14% in 2023 compared to the previous year. Achieving their ambitious plans require substantial Government intervention and investment.
Labour’s policy is woolly, and as always, a huge amount of the devil will be in the detail. It is pleasing to see that commercial real estate is on Labour’s radar.
The sector is preparing and cautious optimism beats the negativity we have seen over the last few years.
The stability of the new Government and its predicted strong majority should allow us to operate with a degree of certainty that has been absent during the years of turbulence, which saw us lurch from Brexit to Covid-19, to the cost-of-living crisis and to the war in Ukraine.
Greater confidence should boost transactions and bring a strong finish to 2024 across all sectors.
Duncan Kreeger is CEO and founder of TAB
