Quarterly survey for the first quarter (April to June) 2021 to 2022 – Summary

introduction

1 – This quarterly survey report is based on regulatory declarations from 209 registered private providers and PRP groups that own or manage more than 1,000 homes.

2 – The survey constitutes a regular source of information on the financial health of PRP, in particular with regard to their liquidity position. The quarterly survey returns summarized in this report cover the period from April 1, 2021 to June 30, 2021.

3 – The Social Housing Regulator is aware of the difficulties associated with forecasting in the current climate and recognizes that even if all the elements of the forecast are not respected, the overall trends in expenditure, income and development are clear.

4 – The regulator continues to examine each PRPthe quarterly survey of. It takes into account a series of indicators and monitors PRP personnel in cases where a risk to the 12-month liquidity position is identified. We can be confident that all respondents are taking the appropriate steps to secure sufficient funding well in advance of need.

Summary

Liquidity

Total facilities and unused facilities increase during the quarter. Slight decrease in cash flow following high loan repayments. Global liquidity remains strong.

  • £ 113.4 billion in total facilities in place at the end of June, up from £ 113.0 billion in March.
  • New £ 2.4 billion financing agreed during the quarter; 78% of that in the capital markets.
  • Free cash balances fell from £ 7.4bn to £ 6.5bn, following loan repayments of £ 1.7bn in the quarter.
  • Total cash and unused facilities amount to £ 34.5 billion; sufficient to cover the planned expenditure in interest costs (£ 3.4bn), loan repayments (£ 3.9bn) and net development (£ 15.9bn) for the Next year.
  • Mark-to-market (MTM) Derivatives exposure remained constant over the quarter at £ 2.0 billion, with the 15-year swap rate declining during the quarter.

Quarter performance

Indicators of interest coverage and income collection remain robust. Major repairs were below expectations but are showing a good start to the year.

  • Spending on major repairs is lower than forecast for the quarter, but at £ 459million it is the highest figure on record for the first quarter.
  • Cash interest coverage (excluding disposals of current assets) of 102% over the quarter, against a forecast of 99%.
  • The interest coverage is due to net cash flow from operating activities £ 0.2 billion lower than expected, offset by a reduction in major repair expenses of £ 0.2 billion.
  • The reductions in net cash flow are attributed to movements in debit and credit balances and increased repair costs for remedial work after the third national foreclosure.
  • Slight deterioration in arrears and rental collection rates since the previous quarter, although they are in line with seasonal trends. Improvement in vacuum losses since March, but these remain at historically high levels.

Investment in new and existing inventory

Increase in development expenses compared to the previous quarter. However, development spending was significantly lower than forecast in March.

The forecast for 12-month development and major repairs spending has risen again, and both are above pre-pandemic levels.

  • £ 3.1bn of investment in housing in the quarter through June 2021; an increase of 11% from the previous quarter, but 30% lower than forecast.
  • 25% decrease in completed units sold on the market compared to the previous quarter and 14% decrease in AH O units completed during the quarter.
  • 18 month pipeline for AH O units amounted to 35,327 units and 11,526 units for market sales.
  • Capitalized repair and maintenance spending is expected to reach £ 2.9bn over the next 12 months, up from £ 1.8bn in the past 12 months.

Sales

Reduction in the number of unsold items during the quarter. Sales declined, after the highest level on record in March 2021, although still above expectations.

  • AH O sales totaled 4,520 units (March: 4,555) and market sales totaled 1,414 units (March: 1,684). AH O sales remain stable, but market sales fell during the quarter.
  • 3% increase in the number of AH O units unsold for more than six months and reduction of 15% of units sold on the market unsold for more than six months.
  • Total asset sales of £ 1.7 billion made; 11% less than in the previous quarter but 9% more than expected.
  • Fixed asset sales 44% above forecast for the quarter, totaling £ 0.6 billion.
  • Current asset sales forecast of £ 4.6bn for the 12 months to June 2022, of which £ 4.2bn relates to properties where development is contractually committed.

Operating environment

5 – The quarter through June 2021 saw the gradual easing of foreclosure restrictions in England, with restrictions lifted in July [footnote 1].

6 – Gross domestic product grew by around 1.0% in June 2021, the fifth consecutive month of growth, but still 2.2% below the pre-pandemic level recorded in February 2020 [footnote 2]. The Bank of England expects GDP recover further over the remainder of the year, reaching pre-coronavirus levels by the end of the year [footnote 3], although growth is expected to slow to more normal rates after 2021.

7 – Construction production fell 1.3% in June 2021 for a third consecutive month, the biggest drop since December 2020 [footnote 4]. This is explained by a decrease in repair and maintenance work (4.2%) offset by a slight increase in new work (0.5%). Total construction production in June 2021 was 0.3% below the pre-pandemic amount recorded in February 2020, while new work was 2.1% below that level.

8 – A combination of external factors including the pandemic, the end of the Brexit transition period and an increase in demand have pushed up the prices of essential materials in the construction sector and caused supply shortages [footnote 5]. Materials such as cement, wood and steel have longer delivery times resulting in delays at development sites [footnote 6]. Labor was also lacking due to the departure of European construction workers.

9 – Headline inflation, as measured by the Consumer Price Index, rose 2.5% in the 12 months to June 2021 [footnote 7]. A monthly increase of CPI 0.5% between May and June 2021 was also recorded, compared to 0.1% recorded between the same two months of 2020.

10 – A temporary increase in the stamp duty threshold to £ 500,000 is in place from July 2020 until the end of June 2021, and a new transitional relief of £ 250,000 will remain in place until the end of September [footnote 8]. From October 2021, the zero rate bracket will revert to the standard amount of £ 125,000.

11 – UK house prices rose 13.2% through June 2021, the biggest annual increase in the past five years. The largest annual increases were seen in the North West (18.6%) and Yorkshire and the Humber (15.8%), while the smallest increases were seen in London (6.3% ) and in the South-East (10.5%).

12 – Estimates from the Office for National Statistics indicate that the UK unemployment rate declined in the quarter through June 2021; a reduction of 0.2 percentage point from the previous quarter, although still 0.8 percentage point above the pre-pandemic levels recorded between December 2019 and February 2020. Universal credit applicants are at their lowest level since the start of the coronavirus pandemic, with 1.2 million new applicants in April 2020 to 130,000 in April 2021.

13 – The Coronavirus Job Retention Scheme, which allows employers to claim subsidies to cover the wage costs of workers on leave, will continue until September 30, 2021. Employees will continue to receive 80% of their regular salary for the remainder of the day. plan, although employers are required to contribute to this from July.

14 – As the country begins to emerge from lockdown, providers will need to remain vigilant and ready to respond to further changes in the operational and economic environment. Forecasts will need to be closely monitored and updated as the economy reopens, and flexibility will need to be included to allow for effective management of growing risks.

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