Slowdown in shared ownership sales driven by London slump

Mr Carleton’s comments also help to explain the rise in first-tranche sales in the Bexley local authority area, which not only had the largest sales increase with a 161 per cent jump, but was also the fifth local authority area with the most first-tranche sales, with 154 units. Cornwall was the local authority with the most sales, with 233 units.

Although on this, Helen Collins, head of the housing consultancy team at Savills, says that while the South West has been a “very good market generally”, the figures could be reflective of where supply has been delivered rather than a bigger picture of market demand characteristics.

“Generally, where there are affordability challenges, but without extremely high prices, this is where shared ownership will do well,” she adds. “It can struggle in lower-value markets where someone on a lower income of £30,000 may well be able to buy a second-hand property with a conventional mortgage.”

Of the top 30 local authority areas in terms of sales, 10 sold less than 100 units. Enfield sat at the bottom of the list with 82 sales, which was down 18 per cent on last year.

G15 sales chimed with the overall dampening of the London market, dropping from 3,045 to 2,496. The number of RPs outside the G15 that sold more than 150 units increased slightly to 14 from 13, with a total of 3,493 sales, compared with 2,898 the year before.

The biggest change in terms of size bands, however, could be seen within the RPs that sold between 100 and 150 units. This number halved to five RPs, which caused sales to drop here from 1,194 units to 637 units.

There was a rise in the number of RPs selling between 25 and 49 units to 34 RPs. They sold a total of 1,199 units compared with last year when 27 RPs sold 965 units.

LA and RP increase and decrease

L&Q saw a significant 58 per cent decrease in first-tranche sales for 2017/18 to 408 units – a drop of 560 units, the largest decrease in sales.

However, the group told Social Housing that it had made an error in compiling data from two systems following its recent merger with East Thames.

An L&Q spokesperson says: “Essentially, we’ve sold around 1,300 shared ownership units over two years. We believe our financial statements offer a more accurate timeline of when those sales occurred – 619 in 2016/17 and 679 in 2017/18 – for a total of 1,298.”

Notting Hill Housing followed L&Q, with a decrease of 236 units, representing a 59 per cent drop for the organisation.

A spokesperson for the group says: “The sales of first-tranche shared ownership homes in 2017/18 were proportionate to former Notting Hill Housing’s sales programme. In the previous year we had seen a larger number of homes for sale handed over (and therefore a larger sales programme), including a number of schemes that completed at the turn of that financial year, which led to a spike in sales.”

In contrast, Orbit had the largest number of first-tranche sales increase for 2017/18, representing an 82 per cent jump on the year before, with a rise of 312 units.

London-based RPs One Housing (a rise of 195 units), Clarion (127 units) and Hyde (79 units),
as well as Home Group (77 units) in the North, made up the remaining top five providers with the largest sales increases.

Tower Hamlets – which for the previous two years had been the local authority area with the largest sales increase – had the biggest sales decline during 2017/18, with a drop of 71 per cent (or 275 units). RPs in the borough sold 114 units.

Eleven other local authority areas that had previously been in the top 25 increase list also found themselves to be the areas with the largest sales decline. The majority – eight – of these 11 local authority areas were in London and the South, including Barnet, Stevenage, Waltham Forest and Bristol.

Savills’ Ms Collins says this could be down to development cycles and availability: “You might get a spike of schemes or one big scheme one year and then that washes through the stats. Then there’s nothing the following year but then it comes back the year after that. So I don’t think that’s reflective of the market, I think that’s supply.”

Southwark was the only local authority area within the top 25 decrease list where more than 200 units were sold. Despite this, it recorded a 21 per cent drop in sales. Elsewhere, the local authority areas with the largest sales increases were Bexley (increase of 95 units), Sutton (84), Maidstone (74), Ealing (72) and Welwyn Hatfield (68), which are in all in the South of England.

Of those, the local authority area with the highest number of LCHO units that had not yet been fully staircased was Ealing, with 2,120. This was the second-highest number in the top 25 sales increase list, topped by Cornwall which had 2,166 LCHO units that had not yet been fully staircased.

Lichfield had the smallest number of LCHO units that had not yet been fully staircased, with 273 in total. It recorded 35 sales this year.

Risk

The regulator’s 2018 Sector Risk Profile said that first-tranche shared ownership sales remain a “significant source of income” for RPs, with sales income expected to increase from £1.2bn per year to more than £2bn by 2020.

But it cautioned that providers should have other options available if sales and staircasing are not delivered in line with their plans. This was because during the last major housing market crash in 2008/09, providers saw a major reduction in values and long delays in sales to shared ownership properties, which required “significant” financial support from the government in order to convert the properties to rent.

“Boards of registered providers must ensure that the information they receive on sales risk exposure is sufficiently robust to support the effectiveness of their decision-making processes,” the regulator added.