Trend-watching in Cannes at the world’s biggest property show.
At MIPIM, the international property show held at Cannes each March, the focus tends to be on deals, mergers and salacious gossip. But in 2016 politics dominated, with Brexit, the UK Budget and the London mayoral election the main talking points in the bars and restaurants on the Croisette.
Brexit was the big one. Investment agents who last year gloried in a record £70bn of activity in the UK property market are this year bracing themselves for a considerable slowdown, with February predictions of £40-£45bn of deals in 2016 looking optimistic. Analysts at the firm PropertyData are currently recording £29bn of activity in the last six months compared with £37bn in the six months before that, with the bulk of those transactions taking place between September and December.
There is now every chance that the market will suspend activity until the June 23 European Union referendum, with most delegates at MIPIM fervently hoping that at that point Britain votes to remain ‘in’. Others privately expressed enthusiasm for Britain to quit the EU, but the overriding feeling is that disruption for up to five years is not worth enduring in what are already tricky times.
It is unusual for the Chancellor to make his statement during MIPIM, but an earlier-than-usual Budget and a later-than-usual MIPIM meant that British eyes were on the live feeds from Parliament on Wednesday lunchtime. There were audible gasps from those watching the Budget when George Osborne announced his 1% hike on stamp duty on commercial property, with property analysts immediately marking down net asset values of real estate investment trusts (REITs) by up to 2%.
New research shows that 436 towers are now planned for London, with 119 proposed in the last year alone
Residential property experts were frustrated by measures that appeared to stifle large-scale investment in the build-to-rent world, but more so by what is now perceived as a continuing threat of further tax hikes. Speaking on a panel session about residential property, Bruce Ritchie, founder and CEO of Residential Land, and one of the most respected commentators on the London property market, expressed concern that, in recent years, investors in the sector are becoming wary of continual tax raids.
But, while Brexit dominated conversation, the issue that focused many London minds in the short term was the London mayoral election. Incumbent mayor Boris Johnson and his predecessor Ken Livingstone are now viewed as unashamedly pro-development, with many London-focussed MIPIM attendees now bracing themselves for a less proactive mayoralty under one of the likely winning candidates Sadiq Khan or Zac Goldsmith.
In a session organised by the Westminster Property Association and the City Property Association, Berkeley Group chairman Tony Pidgley drew encouragement from Livingstone’s campaign pledge to demand 50% affordable housing on large developments. This dropped to 30% once Livingstone took office, Pidgley said, and he is hoping to form a pragmatic relationship with whichever mayor is elected.
One theory which gained strong ground among MIPIM’s political commentators – the event is well-attended by experts in both policy and public affairs – is that Khan, the likely Labour candidate, will be the first London mayor elected on second preference votes. This scenario sees Goldsmith winning the first round of voting on the strength of support in outer London, but Khan ultimately sweeping to victory in a second round once votes from Liberal Democrats and Greens switch to him.
For a group that traditionally leans to the right, the property community is wary of Goldsmith, believing that Khan will ultimately prove to be a more proactive mayor, with a stronger commitment to London’s development. Tall buildings are expected to figure prominently in the new mayor’s in-tray, with new research from New London Architecture and GL Hearn showing that 436 towers are now planned for the capital, with 119 entering the system in the last year alone.
CBRE Residential’s highly-regarded UK chairman Mark Collins, speaking in a session on tall buildings on MIPIM’s London Stand, said, “I love towers”, but also stressed that they have to be well-designed with a meaningful regard for the surrounding public realm.
We either build up or out, went the consensus, not surprisingly favouring inner London densification over building on the outer London green belt.
After the event, back in London, the property market will now prepare itself for the arrival of the new mayor and the outcome of the EU referendum. If Britain votes to stay `in’ there will be an almighty rally. If Britain votes to leave, an element of uncertainty will be lost as well. As far as everyone at MIPIM was concerned, June 23 can’t come soon enough.
Giles Barrie is Managing Director, Strategic Communications of FTI Consulting, and a former Editor-In-Chief of Property Week. The photograph is of One Nine Elms, a development by Wanda One.