Affinity GRE: Property Outlook in 2018Posted on 7th February 2018
2018 is shaping up to be a crucial year for the UK. It is crunch time in Brexit negotiations, inflation rose to 3.1% in December 2017 (a 6 year high) and consumer spending saw a slight decline. Here at Affinity, we look at the key points that will drive our business this year.
UK growth turned out to be rather more robust than had been forecast immediately after the EU referendum result and UK property returns have surprised on the upside in 2017. However, the uncertainty is set to kick in an the UK’s growth is expected to lag behind that of Europe in 2018.
Nominal wage growth currently around 2% and inflation running at 3%. While early 2018 will be tough for households, they should see Consumer Price Inflation (CPI) diminishing to 1.6% by the end of 2018 and a small improvement in wage growth.
As a whole; the Organisation for Economic Co-operation and Development (OECD) predicts that the UK economy will grow by 1.1pc in 2019, compared to 1.3pc in the OBR’s view.
After a lengthy and unproductive series of opening salvos in the Brexit negotiations during 2017, 2018 will be the year in which Brexit becomes real.
Brexit uncertainty will continue to dampen confidence and growth, and currency-induced inflation has not yet fully dissipated, slowing consumer spending. But the weak pound has attracted international real estate investors and tourists to the UK and boosted domestic exports, increasing demand for the offices, prime retail, industrials and hotels sectors.
Brexit is still shrouded in uncertainty and 2018 is the year in which real decisions and agreements need to be made to ensure a smooth transition in March 2019. Here at Affinity, we feel the impact of Brexit will be minimal and throughout 2018 we will continue to see agreements made with international partners.
The Draft London Plan was published in November 2017. the plan aims to address many of the issues currently affecting London and is centred on the concept of ‘Good Growth’ – an idea which broadly translates as “sustainable growth that works for everyone”.
The annual housing target has been set to 65,000 homes (the need being just slightly higher, at 66,000 homes p.a.), while projections see London reaching a population of 10.8m and 6.9m jobs by 2041. Housing growth will be delivered largely in Outer London (55 per cent).
Planning applications for development that hits a certain proportion of affordable housing (35 per cent in most cases) will not have to submit viability assessments.
The draft Plan expects 38 per cent of the overall annual housing target (24,573 out of 65,000 homes) to be delivered on small sites in the next ten years, with a considerable role for Outer London boroughs, where 68 per cent of the total number of small site homes should be located.
London’s land designated as Green Belt makes 22 per cent of the total area. The mayor highlights in the draft London Plan how its de-designation will not be supported in any circumstance.
Given the housing shortage London is facing, these kinds of targets must be met but the GLA and local councils must ensure they are working with developers to deliver these much needed projects. The introduction of Crossrail later this year is crucial to the commuter lifestyle and a move that we will certainly be pleased to see in action.
Currently, the UK needs 240,000 homes each year, but only 140,000 are built annually. The increase in workers migrating to the UK has created a housing shortage, which some are calling a crises.
To tackle this, the Government aim to ensure that 90% of suitable brownfield sites have planning permission for housing by 2020.
2018 is certainly shaping up to be an interesting and crucial year for not only Affinity, but businesses all across the UK.
Our main focus here at Affinity in 2018 is working against the uncertainty of the economy and Brexit and continue to push forward with regeneration projects, ensuring we are providing London and the UK with the housing it so desperately needs.
 CBRE 2018 UK Real Estate Market Outlook
 The Draft London Plan