Savills research reveals extent of growth in housing association sales revenues

09 May 2019

The latest analysis by Savills, launched today at the Social Housing Finance Conference, demonstrates how the 192 largest housing associations are now more vulnerable to housing market fluctuations than ever before.

This is particularly the case in London and the South East, where the bulk of new homes are being built and where signs of a housing market slowdown are already emerging (see bullet points below).

As a result, Savills says in ‘Mitigating Market Risk’, housing associations need to identify mitigation strategies in the event they are unable to sell homes designated for sale.  Switching to affordable tenures is an option that allows homes to be quickly occupied as demand is much less exposed to housing market fluctuations.

However, this will likely require additional grant funding from the government to compensate housing associations for the loss of return on capital and to ensure they are able to continue building homes through a housing market downturn.

Data from the Regulator of Social Housing shows that the housing association sector as a whole is currently continuing to sell market sale and affordable home ownership properties. Although the number of unsold market homes has increased, this has closely tracked the rise in completions. Some problems are arising, according to reports of individual  associations with activities focused in London and the south east. But it is too early to see this in the backward-looking data.

Key findings from the new Savills analysis of sales for the 192 largest housing associations include:

- Turnover from market sales increased by 16% (£221m) to £1.61 billion between 2016/17 and 2017/18, while non-social housing activities turnover increased by only 6.5%

- First Tranche Shared Ownership Sales homes also carry market risk and sector turnover from this activity increased by 10% (£110m) to £1.22 billion over the same period

- The combined increase in turnover from sales and Shared Ownership across the sector was 13% (£334m) to £2.83 billion. Over the same period overall turnover increased by 1.8%

- The majority of the increase in turnover from sales is in London-focused housing associations, accounting for £305m (91%) of the increase

- Average house prices in London fell by 0.6% over 2018 and annual transaction numbers in London were down 26% over the four years to February 2019

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.’

Chris Buckle, director, Savills residential research, added: ‘Making grant funding available to facilitate this activity would bring several benefits. Housing associations would be less vulnerable to market fluctuations, making their business models more robust. Importantly, this would allow them to carry on increasing the number of much-needed affordable homes being built, even when the rest of the housing market is slowing and the support for sales through Help to Buy is scaled back from 2021.’

To read the full report, please click here

 
 

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Key Contacts

Robert Grundy

Robert Grundy

Head of Housing
Housing Division

Head Office London

+44 (0) 20 7409 5995

 

Chris Buckle

Chris Buckle

Director
Residential Research

Head Office London

+44 (0) 20 7016 3881