You are viewing 1 of your 1 free articles
Market crash ‘could lead to ratings cuts among third of providers’
A third of social housing providers could see their credit ratings slashed if the housing market were to crash, according to a report from Standard & Poor’s (S&P).
The ratings agency analysed the possible results of different levels of market downturn in 2018, and predicted that if market prices were to decline by 15% and the volume of sales fell by 50%, a third of providers would have their ratings lowered by one or two notches.
Those entities that currently have a negative outlook in their ratings would likely be the ones to experience the cut.
S&P does not expect this downturn to happen, predicting only a slight decline of 1% in prices in 2018. This report was aimed at examining unpredictable scenarios, and reflects the increased risk that housing associations face after the widespread expansion by the sector into market sales.
READ MORE
S&P expects the sector’s total revenue to increase to £24.2bn by 31 March 2019, compared to £22.7bn in the financial year 2015/16. Along with this increase, S&P has predicted a decrease in operating margins and reflecting the pressures on income from the drop in the pound.
The agency looked at two scenarios. A moderate-risk downturn would lead to only a slight effect on credit ratings in the sector. A high-risk downturn, however, could have a significant impact on associations exposed to higher levels of risk from market sales.
Associations with a negative outlook that would therefore be more at risk from a severe downturn include L&Q, Notting Hill and The Guinness Partnership.
