The property industry should welcome increased immigration.
This argument can be made from both a macro-economic perspective and, more specifically, for UK property as an asset class.
The economic benefits of immigration over the longer term have been argued at length by economists. Now in particular, however, the potential for immigration to inject growth into UK plc is especially pertinent given that many of the variables that can help bolster growth are now at ‘capacity’.
Take interest rates: reduced rates can boost consumer spending but a rate decrease seems unlikely and, practically speaking, they can’t go much lower. Unemployment likewise: at 5.4% it is at its lowest level since April 2008 and significantly below the longer-term average of 7.22% (from 1971-2015). The Office for National Statistics’ ‘inactivity rate’ (individuals not looking for a job or not available for work) is also steadily falling, indicating a tightening labour market and a diminishing pool of potential new labour. The potential for growth to come from higher employment output therefore is limited.
An increase in productivity is possible but that would require increased investment, which, from the public sector, would cut across austerity policy (albeit the latest Budget shows signs of that easing) and on the private sector side remains yet to be seen.
An increase in the workforce would therefore aid growth. With birth rates relatively flat since the late 1960s, a cavalry of new working-age adults is not coming over the horizon any time soon. Many immigrants are young and often well-educated students; they are hard-working and they pay taxes. Immigration, coupled with efficient bureaucracy to get new immigrants into jobs quickly (something EU countries are grappling with, to varying degrees of success) offers an opportunity to inject human capital into the labour force and boost economic output.
There is also room for more people. The UK’s population density of 255 people/sq km is still less than that of some of our immediate neighbours such as the Netherlands (411) and Belgium (355). Even London at 5,510 people/sq km, has room to grow when compared with the likes of economically prosperous Hong Kong (6,349) and Singapore (7,148).
Aside from the potential wider macro-economic benefits, there are also more tangible links between immigration and UK property performance. Property is arguably the most domestic-facing sector. The owners of UK property may be non-domestic companies or individuals but de facto the assets themselves are rooted in geography and the ultimate consumers of property are the people who live in that geography. Property serves the population who reside, work, trade, manufacture, get treated, learn and play in and around buildings.
An office is built and occupied where a competent workforce is available; distribution sheds disseminate goods to domestic populations; retail space sells to the local population; and, of course, that population also needs housing.
On the latter, it is worth noting that immigrants tend to be more flexible in where they settle so the benefits are more evenly spread across the UK. Immigrants are consumers, first and foremost, of property. They may also be the producers of property, helping to construct buildings and infrastructure and to manage labour cost inflation for developers.
The property industry should open its arms to immigrants in 2016.
Richard Craddock is a director at Wells Fargo Commercial Real Estate UK