George Osborne’s budget cast a damper on proceedings at the Cannes property fair
‘Yes, we are on the cusp of a bit of shittiness,’ agreed a partygoer at the MIPIM property fair in Cannes last week. The annual jamboree – a gathering of the world’s developers, financiers, city leaders, agents, general real estate liggers and architects – had started positively in the Mediterranean sun.
The regional pavilions looked crisp, rammed with impressive city-wide models – Istanbul’s visual treat with its light show and moving boats the pick of an impressive bunch. There was flag-flying by those heading the Northern Powerhouse – a strapline that is increasingly gaining depth and credence; the debut of its rival the Midlands Engine; and a confident showing from the London boroughs, with Croydon’s efforts again among the more progressive and design-focused of the capital’s authorities.
But then came the chancellor’s budget and, in the south of France, the rain began.
While George Osborne was downgrading his growth predictions and cutting public finances, the MIPIM delegates huddled in damp marquees or took to the basement of the bunker (the main Palais conference hall) for shelter. Talk turned to whether the property ‘market had topped’ and, if so, to what extent there would be a ‘rebalancing’ of the economy.
Fear of the UK’s potential departure from the EU bubbled below the surface. Architects spoke of projects being put on hold until the referendum. The Chinese slowdown and the instability flowing from Syria’s civil war had made investors cautious. The super high-end luxury apartment market, which had been filling the coffers of the capital’s developers, was –temporarily at least – super cooled. Figures emerged showing that lending to UK property developers had halved since 2014, down from £34 billion two years ago.
MIPIM 2016 was the year of the gilet – the outer vest that shows we’re ready for any economic chill
More worryingly for architects, the re-emergence of bargain-basement fees and undercutting was back on the bar-room banter agenda. And when did anonymous online fee bids start to hit the UK?
Summarising the mood in Cannes, one architect said: ‘MIPIM 2016 was the year of the gilet – the outer vest that shows we’re ready for any economic chill. The Croisette was like an advert for Uniqlo.’ MIPIM-goers sought out those they already trusted rather than gambling on the new. The bravehearts in France were actually staying closer to home.
Despite all this, nobody mentioned a reprise of the catastrophic 2007 global collapse. And while the current nervousness was deterring the quick-hit, yield-hungry, buy-then-flip fly-by-nights, the mood was much more buoyant among those with longer-term goals – such as the billion-pound pension funds.
As one source said: ‘How you see things depends on your end game. There is a state of flux, which is being felt more by those with a shorter-term vision.’
This is not bad news for the profession. Institutional investors are seeking solidity and certainty. This means, for instance, quality, well-designed private rented sector schemes – with longevity and even a social purpose.
So don’t panic – the end is not nigh. There are rays of sunshine from those who – like architects – have a long-term stake in our cities.