Record-breaking year for new finance as HAs plan 25% increase in supply

Over the next 18 months, providers expect to almost double their outright sales delivery.

They expect to complete 31,901 properties for affordable homeownership – which are primarily shared ownership – and 13,783 market sale properties. This compares with 21,490 affordable homeownership units and 7,344 market sale properties developed in the past 18 months.

Fiona MacGregor, chief executive of the RSH, said: “In 2018/19, the sector raised an unprecedented amount of new private finance from banks and the capital markets in order to support plans for increased capital investment.

“The past quarter showed a further increase in the level of new development for sale, both of shared ownership and outright market sale properties, and forecasts anticipate a further increase over the next 18 months. It is important that providers in these markets carefully manage their development risks and are prepared to respond to any changes in the housing market in a timely fashion.”

The survey is based on responses from 221 private registered providers (RPs) and groups that own or manage 1,000 homes or more.

Sales and unsold units

The survey showed that in the past quarter alone, the sector completed 6,367 homes for sale, including 4,817 affordable homeownership units and 1,550 properties for market sale.

However, unsold properties increased by 10 per cent to 1,933 – the highest level recorded since the data was first collected in June 2014. Unsold affordable homeownership properties rose to 6,924.

The RSH said this primarily reflects the “peak in development” and the rise in total units developed.

It also pointed out that more than half of the total unsold market sale units are held by six providers.

The number of properties unsold for more than six months reduced by nine per cent to 637.

Financing and cash

Cash balances totalled £6.1bn at March 2019 but are forecast to fall in the next 12 months to £4.1bn to fund planned capital expenditure. That also means cash interest cover is forecast to fall from 151 per cent in the 12 months to March 2019 to 128 per cent in the next 12 months.

Of the £13.5bn raised in the year, the debt capital markets were marginally ahead of the banks.

A total of £6.72bn was raised from institutional investors, compared with £6.54bn from the banks, with £240m raised by “other” sources.

The £4.5bn of new debt in the quarter was across a range of maturities from short-term revolving credit facilities to 25-year bonds. It included from £2.3bn from the debt capital markets and £2.1bn from banks.

Housing associations repaid £1.3bn of existing loans.

The sector had debt facilities of £97bn with £20.8bn undrawn at the end of March 2019.

Over the next three years, £7.9bn of new facilities are forecast and providers estimate that security is available to support an additional £49.4bn of new borrowing, equal to 51 per cent of current agreed facilities.

Long-term debt continues to account for the majority of the sector’s borrowing, with 82 per cent up for repayment in over five years’ time.

The regulator sais the sector’s immediate refinancing risk is low, and fixed rate debt of more than a year makes up 76 per cent of the sector’s drawn borrowings.

Investment in or lending to non-registered subsidiaries, special purpose vehicles or joint venture entities amounted to £8bn in 2019, half of which is held by three providers.

Total impairment charges expected in 2019 accounts amount to £73m, one-third of which is attributable to three providers.

There was also a seven per cent rise in HA mark-to-market exposure on free standing derivatives, totaling £2.2bn across 48 providers and reflecting a decrease in swap rates.