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Financial planning remains vital as market volatility continues

Published date : 28 November 2012

The social housing sector remains financially strong and continues to access the funding it requires despite continued volatility, according to the latest Quarterly Survey (2012/13 Quarter 2) published by the Homes and Communities Agency today. However providers will need to maintain a focus on robust financial planning and management if they are to continue meeting the regulator’s standards.

As the regulator of social housing providers, the HCA undertakes a quarterly survey of housing providers to establish the levels of exposure to the risks faced by the sector.  The report published today (2012/13 Quarter 2) covers the period 1 July to 30 September 2012 and is based on a survey of all Private Registered Providers owning and/or managing more than 1,000 homes.

As in the previous quarter, Providers continued to turn to the capital markets with bond issues of £733m accounting for 54% of the £1.3bn new facilities arranged.  Five large own-name bond issues raised £675m.  Swap rates remained volatile and again decreased in the quarter, increasing the sector’s mark-to-market exposure to £1.6bn.  This is an area the regulator will continue to monitor. 

Jonathan Walters, Deputy Director of Regulatory Operations, said: “While the UK economy reported growth during the quarter – and providers continued to benefit from low interest rates on their variable rate debt – it remains vulnerable to external shocks.  In this context Providers will need to maintain a focus on robust financial management if they are to continue meeting their objectives, and the standards of the regulator.”

Key conclusions from this quarter’s survey include:

  • The sector’s total reported borrowing facility is £66.9bn of which £55.3bn is currently drawn, leaving undrawn facilities of £11.6bn
  • New facilities arranged in the quarter were reported by providers to total £1.3bn (June £1.7bn)
  • Capital market funding and private placements contributed 60% of the new funding (June 89%)
  • Over the next 12 months the sector forecasts drawdowns of £4.5bn (unchanged from June)
  • 96% of respondents anticipate that current debt facilities are sufficient for more than 12 months
  • There are now 50 PRPs making use of free standing derivatives. The notional value of stand alone derivatives was reported at £9.8bn
  • The current reported mark-to-market (MTM) exposure net of unsecured thresholds is £1.6bn; collateral of £1.7bn has been given, in the form of property or cash
  • On Affordable Home Ownership (AHO), 2,554 first tranche sales were achieved in the quarter (June 2,018); 3,977 remained unsold (June 4,170), of which 1,505 had been unsold for over 6 months (June 1,352)
  • Pipeline AHO completions expected in the next 18 months were 11,757 (June 13,185)
  • Total asset sales of £460m (June £393m) were achieved in the quarter generating a surplus of £125m (June £85m).
  • Increases were reported in all categories of asset sales. AHO first tranche and staircasing showed increases of 20% in sales value. RTB sales value showed the greatest increase at 100%; however, as RTB contributed just 5% of the total sales value in the current quarter this variation does not significantly affect total sales value.

The latest Quarterly Survey is available to download from the HCA website –http://www.homesandcommunities.co.uk/sites/default/files/our-work/qsq2-full.pdf

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