Setting the scene in his keynote address, Savills’ head of residential research Lucian Cook said that increased regulation and the threat of interest rate rises would curtail house price growth over the next five years, especially in London.
But in the meantime, EG’s head of London residential research Nigel Evans says that housing provision in the capital is at an all-time high.
He said a record 47,000 homes are under construction in London, nearly double the last peak of 26,000 recorded in 2007, though this masked serious issues of affordability.
“We may be on the cusp of a paradigm shift,” he said, “away from an owner-occupied market to a rental dominated one. This is a market increasingly polarised, with homes at the one end and investments at the other.”
Mayoral disappointment
Neither of the mainstream mayoral candidates, according to panelists and the prevailing mood in the room, were the ones to fix the crisis, with the view that pledges were not only populist, but far too similar.
“What is remarkable is there is such little difference in reality between the two leading candidates,” said Steve Norris, former government minister.
“At base, they are preaching the same message, and they face the same challenge: how to turn the rhetoric into reality… and I am not sure I have heard a convincing argument from either of them,” he said.
Professor Tony Travers from the London School of Economics said: “There is a risk of disappointment in relation to the housing bids made in this election. Candidates are offering simple-to-understand commitments, but these are pretty steep commitments.”
The pair said that one of the few meaningful powers the London mayor held was the ability to change the threshold for mayoral call-ins, allowing higher density housebuilding, though there was acceptance of the kick-back this would create from the boroughs.
Devolution and government
Outside London, the changing relationship between central and local government was exactly what Clive Skidmore, head of housing development at Birmingham City Council, was excited about.
He said devolution would prompt councils to build more housing of the type needed locally and he saw an appetite among local authorities to be developers to generate capital and income. They could do more than just give public land away and can build housing themselves, he said.
Birmingham council has already built 2,000 homes, of which half are for rent, and is building more than any other developer in the city.
Skidmore said local authorities needed to get out and develop, and devolution would give them the confidence to do so.
“The combined authority approach will put pressure on those laggards that don’t have the confidence or the skills to move at the pace of the quickest,” he said.
Combining authorities would promote faster procurement, the cross-subsidy of sites, the sharing of expertise and the development of regional strategies.
He also said devolution would allow authorities to move away from a one-size-fits-all housing policy.
“The government has two housing priorities: drive housing numbers and drive occupation. But these do not necessarily fit with local housing need,” he said.
“So the opportunities to devolve power should give the regions the opportunities to devise strategies that will respond to their own local housing markets.”
The PRS and leaving well alone
Discussions around the private rented sector ranged from its position in the planning system to how many units it can provide nationally, but top of the list was still government intervention, and the recent stamp duty changes.
“We get it at both ends through an increase in SDLT, because we exit on a yield valuation,” said Harry Downes, managing director of Fizzy Living. “I can understand why the government has done it. In time, it will get used up in the land value, but for those of us that have a pipeline being built, we are getting hit hard.”
“We need constancy,” said Savills’ head of London residential development, Dominic Grace. “The PRS was flavour of the month a year ago, now buckets of cold sick are being poured all over it.”
Threatened rent caps in London were another case in point, but while giving the jitters to investment other policymakers have been so keen to attract, opinion was divided on the potential impact.
Christine Whitehead, professor of housing economics at the LSE, said where third-generation rent caps had been used [where rents are set and indexed] they have worked, as institutional investors want a well-defined rental stream with good security.
But Ryan Prince, vice chairman at Realstar, said when Canada introduced rent controls in the 1980s, it halted new development, which was bad for supply and the customer.
“One of the fundamental challenges around rent control is you never really know where you stand,” he said.
Regardless of the political landscape, Ed Crockett, director of residential fund management at Aberdeen Asset Management, gave his checklist for institutional investment into the sector, which included understanding risk, finding appropriate scale, and the durability of buildings.
And his most important factor: being able to buy purpose-built units. “Quality stock is the lowest risk route to investment,” he said.
Of course finding such stock remains a challenge: panelists were stumped when chair EG editor Damian Wild asked them to name their favourite PRS developments.
To listen to highlights from the summit, visit wordpress.egi.co.uk/news/residential
