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Housing associations are more vulnerable to market downturn than ever, says Savills
Housing associations are now more vulnerable to housing market fluctuations than ever before, according to Savills.
Analysis released by the consultancy last week showed the sector raised £1.61bn from open market sales in 2017/18 – an increase of 16% or £221m on the previous year.
Turnover from first tranche shared ownership sales also increased by 10% to £1.22bn.
The 192 largest housing associations in England are contractually committed to develop 37,000 homes for sale in the 18 months from December 2018, the report said.
Most of these are in London and the South East, where Savills warned that “signs of a housing market slowdown are already emerging”.
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Average house prices in London fell 0.6% in 2018 and the number of transactions dropped 26% over the four years to February 2019.
Savills said housing associations must “identify mitigation strategies” in case they are unable to sell homes built for sale.
This could include switching the homes to affordable tenures, an approach that would likely require extra grant funding from government to compensate associations for loss of returns and help them to keep building.
Robert Grundy, head of housing at Savills, said: “Housing associations have never been more exposed to housing market risk.
“What our research shows is that they need to ensure they understand the impact this increased exposure has on their business plans.
“It underlines the importance of having robust mitigation options available to cope with market fluctuations.
“Housing associations are well placed to flip homes for sale into affordable rented tenures but need compensating for the loss of return on capital.”
The full research paper is attached.
