Development is the part of the property market that goes hand in hand with risk. Predicting and mitigating that risk is a developer’s key objective, making sure that we can deliver what we originally set out to, writes Kate Howe of Muse Developments.
Uncertainty is therefore one of the biggest challenges the property market can face and in the current economic and political climate, it is noticeably present across the sector.
With Brexit discussions nearing their final hurdle, the UK is facing short-term market conditions that are unpredictable. If we exit Europe as currently proposed, we will face a transitional period that will take us up to December 2020, during which time the UK and Europe will acclimatise to the post-Brexit era. This presents a period of market stabilisation where businesses and individuals will need to find their route through the new landscape. As part of the transitional period, the final touches will be made to the agreements developed throughout the Brexit process, some of which will be more complicated and difficult than others.
Looking beyond our own borders, the wider geo-political backdrop presents its own challenges to financial markets and international trading relationships, which influence and shape our markets at home. We therefore face a challenging period both at home and abroad, the outcome of which is difficult to predict at the moment.
It would be easy to be downbeat about the future, if focus was put solely on the negative. But the UK, and in particular the North West, still has a lot to offer. We provide one of the most highly-skilled and highly-educated workforces on the international stage; our universities rank among the best in the world, attracting students from all over the globe; we are one of the strongest and most stable financial markets to invest in, and we have some of the most vibrant and exciting places to live and work in. The future may be uncertain, but it is far from bleak, and we must continue to invest in it if we wish to support future growth, no matter what challenges may lie ahead.
As an industry we must ask this; how do we mitigate the risk associated with an uncertain short-term future if it renders potential development projects unviable? Traditionally, one of the key routes would be to seek support from gap funding sources. If we can’t currently evidence the rents and yields we believe we can secure at completion, then funding for critical path items can mitigate the gap in the short term.
In the post-Brexit world, as we withdraw from such funding streams as the European Regional Development Fund, we cannot predict what will come in its place, and outside affordable housing, it is difficult to ascertain what the Government’s priorities will be. As these sources become scarcer and uncertainty grows, where do we head to next?
There is no doubt that innovation will be key; those of us who can seek out bespoke solutions that meet the needs of our specific development projects will be ahead of the game.
We are presented with an opportunity to look outward, toward our partners across all sectors, from our private sector advisors to local authorities, and to work more closely with them to secure our mutual objectives. The strength of our relationships and partnerships with key stakeholders will create opportunities to bring forward a more collaborative and dynamic approach and to turn what appears, on the surface, to be an insurmountable challenge into opportunity in ways we may have previously not imagined.
The North West in 2019 series features guest contributors looking ahead to next year and will be published throughout December. Interested in taking part? Email a synopsis to firstname.lastname@example.org