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Social housing stock to maintain value despite coronavirus impact, analysis finds
UK social housing will not see significant reductions in value despite increasing rent arrears and voids during the coronavirus outbreak, analysis has found.
A briefing on the impact of coronavirus on valuations of affordable housing stock by JLL and Savills found that ‘Existing Use Value-Social Housing’ (EUV-SH) valuations are expected to “hold up well” while ‘Market Value Subject to Tenancy’ (MV-ST) may fall by 10%.
JLL and Savills estimate that property transactions will plummet by as much as 50% over the course of 2020, cutting the number of sales from 1.2 million to 600,000.
Property consultant Knight Frank also recently predicted home sales to fall by 40% in 2020.
The government has advised the public not to move houses during the coronavirus crisis to avoid breaking social distancing rules, effectively freezing the housing market.
It has since clarified that “essential” social housing lettings – such has for people fleeing domestic abuse or moving out of temporary accommodation – may still continue.
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“On balance” EUV-SH valuations, which assume units will be let in perpetuity for the property’s existing use, are likely to be unaffected by increased rent arrears and voids and proportions of rent not supported by housing benefit, the analysis said.
These factors are likely to be offset by social landlords having lower management costs as a result of reduced activity, delayed repairs and falling capital expenditure and receiving rental income supported by the government’s furlough scheme, it added.
MV-ST valuations will show “modest falls of up to 10%” with areas with high house prices suffering a greater impact.
JLL and Savills said this is due to a number of reasons, including negative house price growth driven by the fall in transactions, market rent increases being suppressed by the economic impacts of the pandemic, and higher risks on rent collection.
The analysis said: “From a valuation perspective, the social housing sector remains generally in good financial health. Compared with the commercial property market, with widespread tenant problems, rental income is remarkably robust and any increases in arrears or voids are marginal.”
The firms also highlighted three “heavily over-subscribed and keenly priced” bond issues which represent high investor demand and a willingness of registered providers to transact.
Housing associations The Guinness Partnership, Optivo and Sanctuary have all placed bonds since the pandemic gripped the financial markets.
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