Can the dearth of available capital really be the industry’s number one issue when, collectively, the wealth of the property industry’s richest 250 investors and developers, exceeds that of New Zealand?
Or, to draw another parallel, this year’s Estates Gazette Rich List shows that this elite group has an aggregate wealth that is greater than nine member states of the European Union.
The 10th anniversary edition of the Rich List is published with today’s EG and reveals that the combined wealth of the richest men and women in UK property this year has broken through the symbolic £100bn barrier.
There are two ways to digest this colossal sum, which marks a 16% increase on last year. The first is narrow; the casting of an envious or admiring eye. The second is to conclude that there is money available to invest in the right asset or development at the right time and at the right price.
Add to that the money available in the lending market – from existing and new institutional lenders – and sovereign wealth fund cash, and the picture is a whole lot rosier. (One sovereign wealth fund figure being bandied about is illustrative: there are 70 resource-based sovereign wealth funds with $75tn to invest and they want to put 5% into real estate).
That is a simplistic analysis, of course. Nevertheless, perhaps property doesn’t have a financing problem. Perhaps its problem is quality. Or realistic valuation.
MPs claimed this week that the government’s Growth and Infrastructure Bill will kill localism. If it’s a straight-up choice between the two, notwithstanding the hand-wringing, pre-election commitment to devolved power, this government would take growth every time. Even in balmier economic climates, politicians of all parties have proved themselves to be localists in opposition and centrists in government. The fact that the economic outlook is so mixed merely compounds it.
The only brake on the government’s growth drive has to be financial stability. It is vital that the UK retains its triple-A credit rating. Financial institutions that are lending to government right now are losing money: they are lending at circa 1.85% when inflation is running at 2.2%. For them the priority is getting their money returned, not the return on their money. And the UK’s triple-A rating reassures them of that.
Those twin considerations are and have to be at the forefront of George Osborne’s Autumn Statement on 5 December. Not localism.
The pursuit of conflicting priorities is something the public – and private – sector will have to get used to. That said, Osborne does have room for manoeuvre. Infrastructure investment, housing market deregulation and fiscal reform (chiefly on empty rates please) should all be in his sights.
A final word on the business rate valuation debacle – it has been delayed from 2015 to 2017 – from Osborne’s predecessor, Alistair Darling. Anyone believing any government would deliver new rateable values in an election year – 2015 – is living in cloud cuckoo land, he told this week’s British Property Federation dinner in London: “Sir Humphrey would no doubt have said that that would be a very courageous decision indeed, minister.”
I am currently sporting an unsightly growth on my upper lip. It’s not a good look; it is for a good cause, however. Like many others in this industry, I am on the Movember bandwagon, sporting a moustache to raise money for the battle against testicular and prostate cancer. Please sponsor me – http://uk.movember.com/mospace/3101289 – others at EG, or anyone else raising money for this worthwhile cause.
