The Environment for Property Development Economic and Policy Forum of the Construction Industry Council 24 April 2013 Peter Cosmetatos Director of Policy (Finance) British Property Federation
Session overview > Introduction > Context > Specific issues, opportunities, challenges > Conclusions The Environment for Property Development – CIC EPF, 24 April 2013 The voice of property
Introduction > The British Property Federation > Lobbying to raise the profile of the commercial real estate industry and improve policymakers’ understanding of its role and importance > So that the legislative, regulatory and tax environment within which our members operate allows them to flourish and contribute to a successful UK economy > Working with other industry bodies in the UK and globally across the full range of relevant policy areas > Your speaker – private sector legal/tax background focusing on property and finance The Environment for Property Development – CIC EPF, 24 April 2013 The voice of property
Context – economic/industry > Little change over the last 12 months:* > Persistently weak and uncertain economic outlook > Banks trying to reduce historic exposure to property > Access to finance ever more difficult, and ever more expensive – so making new property investment and (particularly) development viable is not easy > But huge variations in conditions around the UK * The above sub- bullets all repeated verbatim from last year’s slides The Environment for Property Development – CIC EPF, 24 April 2013 The voice of property
Context – policy environment (1) > Compared to 12 months ago:* > Fiscal consolidation and public sector cuts – still key > Localism, decentralisation and the LGRR – reduced focus/impact? > Local Enterprise Partnerships (LEPs), Enterprise Zones (EZs), Tax Increment Finance (TIF) and City Deals – some loss of focus, but Heseltine positive * Comments in italics on bullets from last year’s slides The Environment for Property Development – CIC EPF, 24 April 2013 The voice of property
Context – policy environment (2) > Compared to 12 months ago:* > Other (generally modest, targeted, limited) measures to support investment in infrastructure, housing, etc. – more heat, if not necessarily light (more desperation?), see further below > Community Infrastructure Levy (CIL) – positive developments, see further below > Planning and the NPPF – politics and controversy ... > Neighbourhood planning – progress slow; NB CIL link > Tax regime – mixed bag, see further below * Comments in italics on bullets from last year’s slides The Environment for Property Development – CIC EPF, 24 April 2013 The voice of property
Specific issues – housing > Extension of Govt equity fund for build to let from £200m to £1bn very welcome > Jury still out on guarantee scheme > lower financing costs not the main issue for large RPs and institutions; value potentially greater for smaller residential investor-developers > Housing starts > Some private sector recovery (build to let helping), real problems in public sector (funding, policy uncertainty) > Mixed feelings on help to buy The Environment for Property Development – CIC EPF, 24 April 2013 The voice of property
Specific issues – CIL > Good revised CIL statutory guidance imposing better discipline on local authorities > New consultation needs strong, vocal support: > Better transition, better consultation and implementation > Payment in kind > Phasing and certainty re CIL for major developments > Credit for non- ‘abandoned’ existing floorspace > Neighbourhood share of CIL receipts The Environment for Property Development – CIC EPF, 24 April 2013 The voice of property
Specific issues – planning relaxations, etc . > Office to resi conversions policy generally sensible – exceptions need to be sensible and pragmatic > Conservatories/extensions – of modest interest to BPF, does not feel critical in the scheme of things > The politics generally still very sensitive (as also clear from Govt difficulties with major planning decisions e.g. HS2, SE airport strategy, etc.) > With localism, there is greater scope for LAs and cities to work effectively with developers The Environment for Property Development – CIC EPF, 24 April 2013 The voice of property
Specific issues – commercial and infrastructure > While finance challenges and macro uncertainty persist, some optimism has returned in 2013 > Market remains very polarised, exaggerated by various commercial and regulatory forces > HMT still finding it very hard to ‘let go’ > New EPR relief for ‘new build’ > TIF, infrastructure guarantee fund, city deals > Heseltine positive but not revolutionary, and mostly slow-burning impact The Environment for Property Development – CIC EPF, 24 April 2013 The voice of property
Specific issues – tax > Government focus remains on headline rates of corporation tax, plus ‘fairness’ and war on avoidance > Rising (upfront) tax/regulatory cost of development unhelpful in risky market conditions > Some poor policymaking in Budget 2012 (especially re high value resi and some VAT issues) > Budget 2013 unexciting (other than on housing); some good news on REITs The Environment for Property Development – CIC EPF, 24 April 2013 The voice of property
Conclusions > Here are last year’s: > A mixed bag in policy terms > Lots of change, lots of new instruments and ideas > Policy announcements sometimes seem more bling than substantive detail > Important that government doesn’t introduce new barriers by mistake (CIL, financial sector regulation, etc.) > Ultimately, the solution lies in the economy, confidence, occupier demand, access to finance > How much has changed...? The Environment for Property Development – CIC EPF, 24 April 2013 The voice of property
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