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Property election manifesto launched in Cannes

With political uncertainty hanging in the air across England, the British Property Federation (BPF) will  unveil its political manifesto in Cannes today (Wednesday 17^th March) at the MIPIM expo.

The BPF, whose members include British Land, Land Securities, Hammerson and Segro, has highlighted five key priorities for the politics of property at one of the most crucial points in the business and political cycle seen for decades. Of course they’re not exclusive to the UK, particularly as many property firms around the world have felt a similar impact from recession and regulation.

Chief executive Liz Peace will discuss the industry’s key objectives at a debate with Simon Milton, London’s deputy mayor on the London stand.

“It is essential that property does not get buried among other political priorities by whoever takes power,” Peace said. “We are writing to all parties to ensure they recognize the contribution that our industry makes, not just with highly visible aspects of housing and retail, but with the more complex relationship it shares with the economy through employment, skills and support every area of business.

“We are at a pivotal point in both the market and the political cycle and our job is to help the next government deliver its objectives in a manner that is workable and that doesn’t damage the industry’s future prosperity. There is a tremendous amount that can be gained by the political administration by working closely with the development industry, particularly given the constraints on public expenditure over the next few years.”

1. Reducing property debt and restoring financial stability

It is vital that we find ways of encouraging new equity investment into property and moderating, as far as possible, the property sector’s boom/bust cycle.

The banks – including those largely owned and/or insured by the taxpayer – have far greater exposure to the property market than they want. Despite the recent surge in commercial property values, it would not be wise to rely on rapid and sustained increases in values to wash away the banks’ problems, and it will be important for the banks to manage the size and timing of losses arising. However, property owners who have lost their equity have no economic interest in maintaining and enhancing the value of their assets or the income streams they generate, which are needed to service their borrowings. The problem will become more acute as interest rates rise, increasing the cost of debt service, unless the economic recovery and rent levels improve at least as fast.

2. Climate change

It is essential that we find ways of improving the energy, water and waste efficiency of the UK’s buildings.

The property sector is responsible for a significant proportion of the UK’s carbon emissions, and consequently needs to play its part in the UK’s ambitious commitment to emissions reduction. The challenge is particularly complex for the existing commercial stock, which is highly heterogeneous, is replaced very slowly, and is largely occupied by businesses who are different from those that own it.

3. Housing

A bigger and better quality private rented sector, which the property industry is more than capable of delivering, with just a little help from Government, at least a partial solution to the housing challenge.

The UK needs more and better quality housing for its growing and changing population. Finding the money to invest in new housing is particularly challenging in the current economic and fiscal environment. Owner occupation has become less accessible particularly for first time buyers. As we begin to pay for the massive stimulus of the last year or two, rising interest rates may overwhelm many home-owners who are currently making their mortgage payments.

4. Investing in the built environment more generally

We need to find creative ways of unlocking the economic and social value in many currently stalled regeneration schemes.

The regeneration of the built environment is vital for economic growth and development – from the jobs created by construction activity, to the efficiencies delivered by more modern and effective transport and other infrastructure and the happier and wealthier communities that could be created, particularly in our cities. However, fiscal and market conditions today make it very difficult to find the money even for the most desirable projects, whether from public or private sources.  

5. Supporting retailers, office occupiers and other businesses

We need to work with our customers and other stakeholders to ensure we can continue to deliver value for both our investors and our occupiers – and that the financial burden of recession is evenly distributed and not allowed to fall unfairly on either property owners (and their investors) or occupiers.

As an asset class, property is an important portfolio diversifier because of its weak correlation with the traditional asset classes of equities, bonds and cash. The owners of commercial property need to generate steady income to ensure that property continues to be an attractive investment, delivering the yield and return profile that their investors, who are the pension funds and insurance companies, expect and need.

At the same time, the industry’s customers (the businesses that occupy its buildings) want greater flexibility, preferably at a lower price – particularly when they are facing financial difficulties themselves.

For more information contact Andrew Teacher, Head of Media on 0207 7802 0364 or at ateacher@bpf.org.uk