Financial stability in the social housing sector continues
Latest quarterly survey published
The social housing sector remains in a strong financial position with access to sufficient finance, according to the latest quarterly survey published by the Homes and Communities Agency today (2 March 2016).
The survey shows registered providers’ financial position on the 31 December 2015 and includes forecasts up to 31 December 2016. The quarterly survey is one of the ways in which the regulator monitors and reports on the financial health of the sector as part of its robust approach to supporting the sector’s financial viability and helping to support providers’ contribution to new housing supply.
The 2015/16 Q3 survey (October to December) reports that the sector has access to sufficient finance, with £14.0 billion in undrawn facilities and £5.6 billion held in cash, and with 97% of providers having sufficient debt facilities to last for more than 12 months.
The sector continues to forecast strong operating cashflows. Cash interest cover over the 12 months up to 31 December 2016 is projected to be 184%. Over this period forecast net operating cashflow is £5.7 billion. This includes £3.0 billion current asset sales.
Cash is forecast to reduce to £4.1 billion over the next 12 months, and most of the sector’s forecast debt requirement over the next 12 months continues to be to fund development programmes. Cashflow forecasts show that the sector plans to invest £9.1 billion in housing supply over the next 12 months.
Figures from the survey demonstrate continued investor confidence in the sector. New facilities arranged in the quarter totalled £1.2 billion (September: £1.8 billion) of which 55% came from banks; capital market funding contributed 45%; two own name bond issues raised £500 million.
Fiona MacGregor, Director of Regulation at the HCA, said:
It is encouraging that registered providers continue to report that they have access to sufficient finance. The December Quarterly Survey shows that providers are forecasting investment of over £9bn in additional housing supply over the coming year, so it will be important that providers ensure that secured facilities are available to cover their forecast drawdowns over the next 12 months.
Providers are also forecasting a significant pipeline of properties for sale over the next 18 months both for shared ownership, and increasingly for outright market sale. We expect providers to manage their development pipelines carefully and will continue to monitor sales forecasts and seek assurance if a provider reports a large increase in unsold properties.
In aggregate, providers continue to have headroom on available collateral, however, there have been significant movements in swap rates since December and individual providers must ensure they have sufficient available security should there be an increase in mark to market exposure.
We continue to engage with these providers to seek assurance that they are managing the associated risks, in particular that they will be able to meet any potential additional cash calls.