With lockdown measures in place until at least May 7, and the coronavirus pandemic continuing to influence all aspects of everyday life, Property Investor Today spoke with Tom Slingsby, CEO of developer Southern Grove.
In this Q&A, we get his thoughts on how Covid-19 is affecting the development sector, whether a possible delay to the Brexit transition period will cause more uncertainty, why buy-in from the local community is so important when carrying out major regeneration projects, and why student accommodation could prove to be a safe haven in these times of crisis.
Coronavirus has now overtaken Brexit as the most important topic of our times, with the government implementing a lockdown and strict social distancing measures. How will the virus and all its unintended consequences affect the property market in the short, medium and long-term?
The revenue of businesses that are more transactional and benefit from short-term activity, such as estate agents and surveyors, are being badly hit. That’s inevitable and our understanding is that these types of companies are relying heavily on the government’s furloughing scheme.
However, plenty of property companies, including developers, have a much longer-term view, and individual schemes take years to come to fruition. We suspect the residential market will recover quickly once the pandemic eases and lockdown measures are relaxed.
It’s also unlikely that a brief suspension, which will have created a lot of pent-up demand, will result in falling house prices because the imbalance between supply and demand in the UK is so entrenched.
This is why it’s so important that we keep building new homes. A significant under supply of stock in the UK is responsible for very high valuations in urban areas and this has created a critical need for affordable housing. All housebuilders need to keep going if the country’s property market is to avoid severe knock-on effects as the population continues to grow.
Long-term, much has been made of whether the UK will see a new-found love of working from home, after millions were forced to because of the virus. We think that is overstated and it is unlikely to significantly impact the popularity of London and Britain’s major cities as places people want to live, given their transport, cultural and commercial advantages.
Is it having any impact on the development activities of Southern Grove and Future Generation?
We haven’t adjusted our attitude to any of our investments and developments at all. It’s business as usual. In fact, we’ve signed some of our biggest deals since the pandemic began.
We are having to be more realistic about the time it will take to achieve planning consents given the likely impact of the quarantine measures on local authorities and public consultations. However, some authorities have adapted really quickly by introducing virtual pre-application meetings, site consultations and even virtual planning committee meetings.
Construction has slowed as contractors take heed of the government’s social distancing advice but this won’t have a material impact on the completion dates of these schemes or the business.
Southern Grove always places a key focus on its developments being fully affordable. This term has been rather hard to pinpoint in recent years, as house prices and rents have soared across the country. What counts as affordable to you?
Yes, it can be confusing. We work closely with leading housing associations to ensure the product we deliver meets the needs and demands of the local authority and residents.
Affordable housing can be delivered in a number of tenures. For those who want to own their own home, Shared Ownership is a form of affordable housing that means the buyer purchases a portion of the home and pays rent to a housing association for the percentage of the property they don’t own. For renters, there is Affordable Rent, London Affordable Rent and London Living Rent.
In certain circumstances, there can sometimes be a perception that affordable housing, especially shared ownership, isn’t an affordable product, especially when it is delivered in high-value areas.
To overcome affordability concerns, we ensure the shared ownership product we deliver will be accessible to a wide range of gross household incomes. Working with the HA, we offer a product that commands minimal equity requirements together with a low rent on the unsold equity.
This ensures that our homes are available to individuals or families with gross household incomes that fall well below the limits set by the GLA. This also helps us guarantee affordable units for key workers within the borough. Making prudent affordability assumptions creates greater flexibility for prospective residents, allowing more local people to buy their own home.
The relationship with the local authority is also key and, where possible, we offer to enter into a Nominations Agreement with the authority to prioritise applications from local people in the early stages of marketing the scheme.
There is a chance the Brexit transition period will now be extended because of the crisis – what impact would this further uncertainty have on the market?
Very little. The UK property sector continued to pull in institutional money after the referendum, despite all the doom and gloom. The only international investors to back away from Britain during that time in any quantity were smaller, residential landlords.
The two main reasons for that were relatively high prices in the areas in which they favoured buying (London and the South East), and a less favourable tax regime. Now that the UK has left the EU, the amount of scaremongering has died down dramatically and we know that, before the pandemic, the residential market was enjoying a Boris Bounce, even though we are still in the transition period.
When it comes to major regeneration projects, how important is it to regenerate without gentrifying too much, or pushing existing residents out?
An area that gentrifies gradually is a sign that regeneration has been successful. The trick for planners is to plan regenerations so that local people benefit from a greater number of better-paid jobs before the cost of living rises significantly.
Better provision of affordable homes — preferably as part of 100% affordable schemes like those we are developing — helps to achieve this, and the local community is better protected.
How important is buy-in from the local community and stakeholders when it comes to large regeneration and mixed-use projects?
Support from the local community is essential and you get that by engaging with local people early on. Large regeneration projects normally present opportunities to deliver much-needed amenities to an area. If you understand the needs of the local residents and explain the benefits of the scheme as early as possible, you can avoid a situation where they oppose change because they don’t feel they are being looked after.
Often generations of families have been brought up in the area you want to build in, and they know the surroundings and local priorities far better than you do. A successful regeneration means pulling the whole community together. A developer who doesn’t understand the area and doesn’t listen to local people won’t get very far.
Are purpose-built student accommodation developments a safe bet for investors in these potentially troubled times?
The UK is a hugely popular destination for international students and will remain so. It’s also globally recognised as a centre of learning, boasting many of the world’s best universities.
All this will guarantee the future of the PBSA sector in Britain, aided by the evolving tastes of students who now increasingly choose purpose-built student communities over the ‘student digs’ of old. We offer far better service, comfort, facilities and security at a comparable price so there really is no competition.
Source: Property Investor Today