Market sales fall to lowest-ever level among large landlords

Landlords have been navigating the uncertain housing market since it was rocked by the so-called Mini Budget in September 2022. High interest rates have dampened activity, but there have been signs of a market recovery in the past few weeks.

Nevertheless, many organisations have been dialling down their development plans, across all tenures, to focus on improving their existing stock amid a heightened scrutiny of standards.

The Regulator of Social Housing (RSH) flagged that market sales activity is concentrated in the sector, with 12 landlords accounting for nearly three-quarters of all sales.

Completions of private market homes in the quarter also fell sharply, to 487, compared with 1,146 the previous quarter.

This was the lowest level of completions since the three months to the end of June 2020, which was affected by the first wave of the pandemic.

Elsewhere, the survey revealed that landlords’ cash reserves fall to their lowest level in “over” 10 years.

Cash balances shrank by £500m to £3.9bn in the latest quarter, while the regulator said it expected reserves to fall further, to £2.7bn, by June 2025.

In a press release, the RSH said it “continues to monitor and engage with providers, particularly those that have a reliance on sales to support their cashflows”.

The survey also showed that cash interest cover was 79 per cent at the end of the quarter, up from 76 per cent the previous three months. However, the RSH said this was still “one of the lowest levels ever recorded”.

Shared ownership sales held up better, with 4,252 homes sold, down 8% on the previous quarter.

However, completions of shared ownership homes fell to 3,790, their lowest level since September 2020 and 36 per cent down on the previous quarter.

Spending on developing homes rose to £3.5bn, up from £3.1bn the previous quarter.

The RSH pointed to a continued increase in activity by for-profit providers, as it said five of these organisations accounted for around 10% of development spending in the past year.

Many of the big for-profits are focusing on developing shared ownership homes.

The survey also revealed that landlords’ spending on repairs remained at “record levels”.

A total of £771m was spent on repairs and maintenance, which was the highest first-quarter total recorded, although 21 per cent lower than the previous quarter.

The sector’s total debt edged up to £131.7bn at the end of June, compared with £129.1bn the previous quarter. 

Will Perry, director of strategy at the RSH, warned that landlords have limited financial headroom due to their spending on development and tackling issues such as building safety, as well as damp and mould.

“It is vital that they have strong governance arrangements in place to identify, stress test and mitigate financial risks,” he said.

“We will continue to review providers’ finances, including through our annual stability checks this autumn, as well as our inspection programme.”

The survey was conducted among 200 registered providers, each with 1,000 homes or more.