Examining the potential impacts of Brexit

14 Nov Examining the potential impacts of Brexit

No discussion about the future of the property industry is complete without considering the potential impacts of Brexit. With prospects looking relatively gloomy, conversation was sparked around perception vs reality and the opportunities which may arise within the next year for those that take an innovative and creative approach to the challenges which will inevitably arise.

The ‘cost of material are a concern’[1] to many developers along with availability of labour. With there being no indication as to what Brexit really means, most developers are preparing for the worst and considering alternative measures which they may need to implement. The pound has already fallen materially compared to other currencies which has driven up the cost of imports and as prices rise, it will be important for developers to re-consider the profitability of their projects. Combined with the impacts of a slowing sales cycle in the market, times are tense which is encouraging more developers to ‘stay with the relative safe haven of the help to buy scheme’[2]. In addition, it was mentioned that there are already signs of a reduced workforce impacting the productivity of projects.

For new developers, this will be particularly challenging with contractors generally ‘sitting with repeat business’[3] to ensure their own financial security. As a direct impact of this trend, developers are ‘desperate to keep their workforces busy’[4] in order to mitigate the opportunity to move elsewhere.

From an external perspective, the UK is still perceived as the ‘golden goose’[5] to many international investors. There is therefore a possibility that capital will be deployed across the UK manufacturing sector to act as a stop gap for the constricting material supply and resources will eventually be produced locally. Other options include bulk buying materials at wholesale prices and storing them but finding the space to do so bares a financial cost and impacts profitability. Much of the concern actually arises from a lack of clarity around what exactly Brexit is.

Despite many developers thinking ahead to tackle potential scenarios, there could be some advantage to waiting for confirmed criteria before acting. The situation was compared to the independent vote in Scotland; ‘until it became clear what exactly it meant’[6], there was a window of opportunity to put contingency plans in place. In the case of Brexit there is likely to be a time buffer to react to any new or unexpected changes.

In terms of moving forwards, some parts of the market are remaining strong.  ‘Bristol doesn’t appear to have felt the impact’[7] just yet and, if the effects of Brexit are as significant as predicted, there was talk that it could present an opportunity to innovate. The property industry has been one of the ‘last to embrace technology’[8] and so, Brexit might give the sector as a whole the push it needs to become more efficient and ‘plug the gap’[9] which Brexit leaves behind. Evidence of this already happening is with developers becoming increasingly interested in modular builds.

The opportunity to produce the ‘actual unit offsite’[10] could mean that processes become quicker, more streamlined and appeal to a different type of workforce, potentially in areas of low employment. This will inevitably kick start the local economy and provide new construction methods, new material sources and have the added benefit of ‘improved quality control’[11]. In general, despite Brexit presenting the opportunity to innovate and drive the industry forwards, most developers are looking to ‘de-risk projects as far as possible’[12] before adopting new technologies and methods in a sustainable way.

 

[1] Raouf Belmouloud, Managing Director, Grace Charles Property London

[2] Raouf Belmouloud, Managing Director, Grace Charles Property London

[3] Daniel Hillman, Managing Director, Hillnic

[4] Daniel Minsky, Director, Estate Office

[5]Raouf Belmouloud, Managing Director, Grace Charles Property London

[6] James Graham, Director, CBRE

[7] James Graham, Director, CBRE

[8] Matthew Firmston-Williams, Business Development Manager, LandInsight

[9] Matthew Firmston-Williams, Business Development Manager, LandInsight

[10] Laith Mubarak, Head of Acquisitions, Click Properties Limited

[11] Laith Mubarak, Head of Acquisitions, Click Properties Limited

[12] Daniel Minsky, Director, Estate Office

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