Experts share their views on our clients' key questions on the property market

Addressing infrastructure challenges in development projects

We kick off with a question about infrastructure. A client pointed out that in cities such as Canterbury, approved developments are on hold due to capacity issues in local utilities, such as drainage and electricity.

Mechanisms like Section 106 obligations could help secure the necessary upgrades to infrastructure. Significant investment in infrastructure will be vital to achieving the governments’ ambitious housing targets, such as 1.5 million new homes over the next five years. Whether funded by the private sector or public investment, upgrading infrastructure is crucial for driving future development.

Exploring modern methods of construction (MMC) and prefabrication

The potential of modern methods of construction (MMC), such as prefabricated housing, was a popular topic, with attendees curious about whether these approaches could help meet future housing needs.

While MMC holds promise, it was acknowledged that inconsistent housing policies and market fluctuations make it challenging to adopt at scale. There was a call for more robust government support, including tax incentives, to foster growth in the sector. Although optimism surrounds prefabrication's role in addressing housing shortages, it was noted that it may only partially resolve immediate supply issues as there is also an important skilled labour gap and the need for significant investment in construction capacity across the housebuilding sector.

The impact of tax policy on property investments

One client raised concerns about changes to mortgage interest deductions for landlords and other tax implications. The experts pointed out that while no official proposals have targeted mortgage interest deductions for limited companies, similar regulations in regions with strict rent controls have led to a decline in rental stock. This highlights how policies meant to protect tenants can unintentionally discourage investment.

There was also speculation about capital gains tax (CGT) changes potentially taking effect immediately after the Autumn Budget. If delayed, it could prompt a rush to sell properties prior to an impending deadline, potentially causing market disruption. 

The discussion further touched on council tax. A simple revaluation of properties, however warranted, would potentially only result in a redistribution of the existing tax liability between households at a local level. By contrast, raising rates for higher-value properties or setting a minimum charge for those in the highest band would be a revenue raiser and was considered more likely. 

“It is important for our clients to discuss potential tax changes with their advisers. Reviewing strategies and understanding the impact of changes like mortgage interest deductions are crucial for protecting investments and navigating the market.”

Justin Snoxell, Director Real Estate Finance, Commercial Banking

Shifting market dynamics between City, West End, and Canary Wharf

A question arose about comparing rental prices between the City of London, the West End, and Canary Wharf, and whether Canary Wharf should be part of the analysis. It was clarified that Canary Wharf was not included due to its unique market conditions and ongoing transformation into a life sciences and diversified business hub, making it distinct from the City’s traditional financial market.

Rental costs in Canary Wharf are significantly lower per square foot than in the City – exceeding £100 per square foot, compared to £50-£60 per square foot in Canary Wharf. This considerable difference could attract businesses looking to reduce expenses, potentially sparking relocations to Canary Wharf, especially for companies facing budget constraints.

The experts remain optimistic about Canary Wharf's prospects. Although some may quickly dismiss the area, there is confidence that ongoing revitalisation efforts – such as enhancing public spaces and retail – will make it a more dynamic mixed-use environment. This evolving landscape, competitive rental rates, and shifting towards a diverse economic base positions Canary Wharf as a compelling choice for companies. The expectation is that these strategic changes could lead to a wave of relocations, reshaping market dynamics as businesses consider the advantages of moving from the City or West End to benefit from lower costs and new opportunities.

Tackling skills shortages in the construction industry

The final topic of the evening was the ongoing shortage of skilled labour in construction, which continues to affect housing delivery.

The discussion highlighted that the shortage impacts traditional trades and roles requiring advanced construction techniques. Comprehensive training programmes are considered essential to develop a workforce capable of implementing modern methods, with suggestions for tax breaks or grants to encourage investment in new technologies.

“As we bank both construction companies and real estate investors we see this challenge from multiple aspects. The skills shortage and raw materials costs are always a topic of conversation for delivering on a viable project. A long-term commitment to training and stable policies is essential to meet future housing targets.”

Tony Eden, Head of Commercial Banking

Immigration policies also play a role in labour availability, as the construction sector has traditionally relied on overseas workers. Stricter immigration rules could worsen the skills gap, making it necessary to balance immigration needs with efforts to train domestic workers. Addressing the skills shortage will require a long-term commitment to training, stable policies, and support for innovation to ensure the industry can meet future housing targets and keep pace with modern construction practices.