HCA keeps watch as associations miss sales forecasts

New figures show that the sector’s largest social landlords generated £182m less revenue than expected on homes built specifically for sale in the three months to June this year.

The Homes and Communities Agency (HCA) told Inside Housing it would keep a close eye on whether declining sales were part of an emerging pattern as speculation grows about slowing market confidence following the Brexit vote.

The HCA’s latest quarterly survey, published today, shows 239 housing associations received income of £531m from current asset sales between April and June – 25.5% less than the £713m forecast and £304m down on the previous quarter.

Jonathan Walters, assistant director of regulation at the HCA, said: “We have certainly noticed the decline and it is something we will be watching in the next quarter to see if a pattern is beginning build. That will be a potential trend that we will watch carefully and clearly, if there is a decline in sales post the referendum, that is something we will want to watch carefully as a regulator.”

The quarterly survey said three quarters of the shortfall were attributable to three large providers and the lower-than-expected revenue was “largely a result of timing differences and delays to sale completions.” The HCA said the providers in question have sufficient access to liquidity and the delays do not have a material impact on viability.

Housing experts, including the Royal Institution of Chartered Surveyors, have reported a cooling of the housing market prior to the referendum, as anxieties about the vote began to settle in. Mr Walters said: “The question is whether this is a reflection of a weaker market in the run-up to the referendum and whether it will continue.” Over three quarters of the shortfall came from three large associations.

He added that sales could also have been brought into earlier quarters to avoid George Osborne’s changes to stamp duty. Fixed asset sales – from properties built for the longer-term – totalled £454m.

The sector’s global accounts in February showed housing associations’ increased dependence on surpluses from for-sale activity, increasing from £324m in 2014 to £501m in 2015.

The quarterly survey also showed a record high in the sector’s ‘mark to market’ exposure, which rose from £2.9bn at the end of March to £3.5bn at the end of June.

Housing associations that use free-standing derivatives – complex financial instruments – had a total of £4.2bn in collateral to meet cash calls, largely through an increase in property and a reduction in headroom.

The regulator says it will engage with associations “where there are significant levels of exposure”.

Mr Walters said a small number of landlords might find their housebuilding ambitions “tempered by the fact that they haven’t got as much security to post against debt as they might like”.

In the three months to June, associations spent a total of £1.8bn on acquiring and developing new homes, the same figure as the previous quarter.

The National Housing Federation is currently lobbying for associations to have the flexibility to build homes for sub-market rent – not just for sale – in the Shared Ownership and Affordable Homes Programme 2016/21.