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Sector feels impact of COVID-19 as sale receipts and margins fall
Registered providers balance sheets were squeezed during the first quarter of 2020/21 as the impact of the COVID-19 pandemic led to a sharp fall in sale receipts, however forecasts show landlords are looking to increase exposure by building more homes in the private sale and shared ownership markets.
The Regulator of Social Housing’s (RSH) latest quarterly survey found that total sale receipts from the sector were £0.9bn between April and June this year, down 21% on the same quarter last year and a decrease of 56% on forecasts made in December before the COVID-19 crisis hit.
Current asset sales for the quarter, combining market sales and first-tranche affordable homeownership (AHO) sales, were £0.5bn, which was 23% less than the forecast of £0.7bn. Providers reported this was mainly due to delays in completion.
The overall surplus on AHO sales was £40.3m in the quarter, giving an average margin of 18.3%, which is the lowest margin recorded since 2013.
Meanwhile, the number of unsold AHO units increased by 1% to reach 7,906, however the English regulator said this was partly due to an additional provider responding to the survey for the first time contributing an additional 429 units.
While the sector felt the impact of the COVID-19 pandemic during the early months of lockdown, forecasts included in RSH’s report show that landlords are now looking to ramp up their development activity and market exposure.
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Over the next year, expected investment in new housing supply is forecast to be £15.5bn, of which £10.6bn is contractually committed.
This marked a 18% increase from the previous quarter, when providers were forecasting investment expenditure of £13.1bn but is still lower than the pre-coronavirus forecast from December of £16.9bn, of which £11bn was contractually committed.
Similarly, the sector has forecast £4.2bn of current asset sales over the next 12 months, up 17% from the £3.6bn forecast made in March but down 22% from the £5.4bn forecast made in December.
Over the next 18 months, providers are forecasting the completion of 33,230 AHO and 10,390 market sale units.
In total, this marks an 11% increase on the estimates made in March but marks a 2% drop on AHO units and 16% drop in market sale units compared with December estimates.
Despite the challenges, the regulator’s survey, which is based on returns from 215 registered providers, shows the sector is in a strong financial position overall.
A total of £107.1bn of debt facilities were in place at the end of June, of which £24.8bn was undrawn. New finance of £4.5bn was agreed in the quarter, including £1.3bn from the Bank of England’s Covid Corporate Financing Facility in which eight providers participated.
Will Perry, director of strategy at RSH, said: “The results of the quarterly survey show that the social housing sector continues to maintain a good financial position in the face of considerable challenges.
“The next few months may mean further uncertainty due to the continued impacts of the pandemic and we expect providers to be ready to respond promptly to the changing environment, alongside maintaining services and investment, and planning for the long term.”
