There is a possibility that within the next few months we will have a different Government. Recent poll figures indicate that this may not be a majority government and this may impact on some policy changes. However there will undoubtedly be significant effects on the Property & Construction Sector.
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A feature of discussion on the economy for some time has been the potential ‘Cameron bounce’ which would lift the economy and with it improve the property market. However in recent months, as the level of Government deficits have become more and more apparent, most property analysts consider that, whichever party wins, the necessary economic medicine will more than outweigh any ‘bounce’. At the time of writing Savills was forecasting that economic conditions would see residential property prices in Southern England fall by 4 per cent in 2010. It seems likely that economic constraints could have a similar effect on the wider property and construction sector.
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Grant Shapps, Conservative shadow housing minister is on record as saying that “we’re going to be unashamedly pro-development”. This has been supported by proposals to give local authorities greater power in decision-making and to provide extra funds equal to tax income generated by newly built homes and commercial property in their area. Initially there was strong backing from the biggest property developers, the hope being that this policy would help encourage councils to streamline planning processes and encourage developments. However there are now strong concerns that this policy of ‘localism’, in providing local communities with a much stronger say in whether developments should go ahead, could in fact lead to more projects being rejected. Where the balance lies between these two conflicting factors will have a significant effect for the sector.
A clear part of Conservative policy is to cut public sector spending and indications are that this would happen more quickly than under the existing Government. Undoubtedly capital projects would be affected and it is notable for example that no promises have been made to continue with the £16bn Crossrail project. A stated Conservative business policy is however to increase government procurement from smaller firms which may well, at least for these, have the potential to negate any reduction in work arising.
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The Tories have undertaken to review the community infrastructure levy that comes into affect this month and in this are supported by the Liberal Democrats which may be significant in the event of no overall majority. Fears have been expressed by the British Property Federation that this levy could hold up development, rendering many sites uneconomic.
The Tory policy of the removal of stamp duty land tax (SDLT) for first time buyers of properties valued at below £250,000 has now been negated, at least temporarily, by the changes to SDLT in the budget, though they would still hope that the dropping of Home Information Packs would also help to stimulate the housing market. However the Tories have no plans to change SDLT on commercial buildings and at the date of writing no proposals have been made to change the empty rates rules.
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Individual businesses in the sector need to be considering what affect these potential changes might have on them in the future and revisiting their business strategies to ensure they are robust in this changing environment. For example:
- What impact would government cuts in public capital projects have on your plans, funding needs, workforce and so on both directly if you were expecting to be engaged on them and indirectly if existing contractors attacked your markets to make up the deficit?
- Do you need to strengthen your links with local communities to help combat localism policies?
- Have you maintained and built on relationships with local government should there be a surge in demand for development?
- Have you carried out sensitivity analysis on your projections and forecasts to test the effect of any changes in workflow or the timing of workflow and put contingency plans in place to deal with them?
In a changing environment the businesses which are best prepared will be those which both survive and can take full advantage at the earliest opportunity of improvements in sector conditions.