皇冠体育app

Introduction

This quarterly survey report is based on regulatory returns from 215 private registered providers and PRP groups who own or manage more than 1,000 homes.

皇冠体育app survey provides a regular source of information regarding the financial health of PRPs, in particular with regard to their liquidity position. 皇冠体育app quarterly survey returns summarised in this report cover the period from 1 April 2020 to 30 June 2020.

皇冠体育app regulator continues to review each PRP鈥檚 quarterly survey. It considers a range of indicators and follows up with PRP staff in cases where a risk to the 12-month liquidity position is identified. We have assurance that all respondents are taking appropriate action to secure sufficient funding well in advance of need.

皇冠体育app coronavirus outbreak was declared a global pandemic on 11 March. 皇冠体育app UK was put into lockdown on 23 March to limit its spread, which had an immediate impact upon the housing market. An initial easing of restrictions was effected from May, with further easing in June and July.

Summary

皇冠体育app position reported at the end of the quarter showed that, despite the challenges of lockdown, the sector remained financially strong with access to sufficient finance:

• Debt facilities of 拢107.1 billion were in place at the end of June, of which 拢24.8 billion was undrawn. At the end of March undrawn facilities were 拢21.9 billion.

• Available cash balances increased by 拢0.1 billion during the quarter to reach 拢6.4 billion at the end of June. This has been forecast to reduce over the next 12 months to 拢4.2 billion as cash is used to fund capital investment.

• New finance of 拢4.5 billion was agreed in the quarter, including 拢3.1 billion from capital markets and 拢1.3 billion from banks. Capital market funding included 拢1.3 billion from the Covid Corporate Financing Facility, in which eight providers participated.

• Providers making use of free-standing derivatives reported mark-to-market exposure of 拢2.7 billion, a 6% increase since March, reflecting a decrease in swap rates at the quarter-end.

• In aggregate, providers continued to have headroom on available collateral on MTM exposures.

As anticipated, performance in the quarter reflected the challenges experienced from the lockdown which impacted on sales receipts and margins, and income collection. However, this did not destabilise the sector鈥檚 overall strong financial position:

• Cash interest cover, excluding current asset sales, was 143% in the quarter to June 2020 compared to a forecast of 118%. 皇冠体育app improvement in interest cover was largely a result of capitalised repairs and maintenance expenditure being 拢153 million (39%) below forecast.

• Including both current and fixed asset sales, total sale receipts were 拢0.9 billion in the quarter, generating surpluses of 拢0.3 billion. In aggregate, asset sale receipts were 10% below the forecast made in March, although some providers had not previously updated their forecast to include impacts of the lockdown. In comparison to the pre-coronavirus forecast in December for the same period, asset sale receipts were 56% lower than predicted.

• Investment in housing supply was 拢1.8 billion in the quarter to June 2020. This was below the total forecast expenditure for the quarter of 拢2.1 billion, and down 47% from December, but above the 拢1.7 billion forecast on contractually committed schemes.

• During the quarter 1,663 affordable home ownership units were developed, and 1,963 were sold. 皇冠体育app number of unsold units increased by 1%, to reach 7,906 at the end of June [^1]. Around half of the unsold AHO units were held by 16 providers.

• During the quarter there was a 13% increase in the number of AHO units unsold for more than six months, which reached 3,460 at the end of June.

• Margins on AHO sales averaged 18.3% in the quarter, the lowest rate achieved since quarter three of 2013/14. First tranche sale data was first collected in 2011. AHO margins have reduced steadily from a peak of 31.2% in quarter three of 2017/18.

• During the quarter 347 market sale units were developed, the lowest figure reported since sales data was first collected in 2011, and 508 were sold. 皇冠体育app number of unsold properties decreased by 8% to 2,816. Over half of the total unsold market sale units were held by seven providers.

• 皇冠体育app decrease in the number of unsold market sale units reflected the low number of units acquired or developed in the quarter. An average of 1,282 units were completed in each of the past three quarters, compared to 347 units completed in the latest quarter.

• Expenditure on capitalised repairs and maintenance in the quarter amounted to 拢243 million (March 2020: 拢592 million, June 2019: 拢430 million). This is the lowest level of capital expenditure reported since cashflow data was first collected in 2015, as lockdown restrictions and social distancing measures reduced the ability of providers to carry out planned programmes.

• Mean arrears increased to 4.0% during the quarter, and mean void rent loss increased to 2.2%. Rent collection rates reduced to 97.2%, compared to 97.9% in the same period of the previous year. Void rent losses are the highest and rent collection rates the lowest recorded since income data was first collected in 2013, however this has not undermined the sector鈥檚 overall strong financial position.

Forecasts for the next 12 months indicated that the sector expects to increase its development and housing market exposure, and its investment in existing stock. Forecasts will continue to evolve over the coming months and will be heavily dependent upon any further coronavirus restrictions or localised lockdowns.

• Forecast capital expenditure over the next 12 months was reported to be funded by drawing additional debt of 拢5.9 billion, use of 拢2.3 billion of cash reserves, and grant funding of 拢1.5 billion.

• Over the 12-month forecast period, expected investment in new housing supply was forecast to be 拢15.5 billion, of which 拢10.6 billion was contractually committed.

i) This was an 18% increase from the previous quarter, when providers were forecasting investment expenditure of 拢13.1 billion.

ii) It is still under the pre-coronavirus forecast from December of 拢16.9 billion, of which 拢11.0 billion was contractually committed.

iii) In the 12 months to June 2020 actual investment in new supply was 拢11.1 billion.

• For the 12 months to June 2021, the sector was forecasting 拢4.2 billion of current asset sales and 拢1.3 billion of fixed asset sales.

i) This was a 14% increase from the previous quarter, when providers were forecasting 12-monthly current assets sales of 拢3.6 billion and fixed asset sales of 拢1.2 billion.

ii) 皇冠体育app pre-coronavirus 12-month forecast made in December included 拢5.4 billion of current asset sales and 拢1.6 billion of fixed asset sales.

iii) In the 12 months to June 2020, actual current asset sales were 拢3.4 billion and fixed asset sales were 拢1.9 billion.

• For the 12 months to June 2021, the sector was forecasting 拢4.2 billion of current asset sales and 拢1.3 billion of fixed asset sales.

i) This was a 14% increase from the previous quarter, when providers were forecasting 12-monthly current assets sales of 拢3.6 billion and fixed asset sales of 拢1.2 billion.

ii) 皇冠体育app pre-coronavirus 12-month forecast made in December included 拢5.4 billion of current asset sales and 拢1.6 billion of fixed asset sales.

iii) In the 12 months to June 2020, actual current asset sales were 拢3.4 billion and fixed asset sales were 拢1.9 billion.

• In the next 18 months, including committed and uncommitted development, providers were forecasting the completion of 33,230 AHO units and 10,390 market sale properties.

i) In total, development estimates increased by 11% from the 18-month forecasts made in the previous quarter.

ii) However, the June development pipeline is still a 2% drop in AHO units and a 16% drop in market sale units compared to pre-coronavirus December numbers.

iii) In the 18 months to June 2020, 22,351 AHO units and 8,149 market sale properties were developed.

• For the 12 months to June 2021 the sector was forecasting capitalised repairs and maintenance expenditure of 拢2.3 billion.

i) This was an 8% increase on forecast expenditure made in the previous quarter.

ii) 皇冠体育app pre-coronavirus 12-month forecast made in December included capitalised major repairs expenditure of 拢2.4 billion. Generally, providers are reporting that they are planning to reschedule any capital expenditure that was delayed during the first quarter of the year to a later date.

iii) In the 12 months to June 2020, capitalised expenditure on repairs and maintenance was 拢1.8 billion.

Operating environment

In response to the coronavirus pandemic, the UK was put into lockdown on 23 March. An initial easing of restrictions was effected from May, with further easing in June and July.

皇冠体育app UK is now in a technical recession, after Gross Domestic Product fell by 2.2% in the quarter from January to March, followed by a record fall of 20.4% in the quarter from April to June. 皇冠体育app International Monetary Fund has revised its forecast for global economic growth in 2020 from the increase of 3.3% that was expected in January 2020 , to a contraction of 4.9% .

In light of the expected economic impact of coronavirus, the Bank of England reduced interest rates to 0.25% on 11 March. In a further emergency response this was reduced for a second time on 19 March to 0.10%, where it currently remains.

皇冠体育app coronavirus lockdown had an immediate impact upon the housing market. Construction sites were shut down while safety measures were put in place, and non-essential house moves were put on hold. An easing of restrictions in May meant that the housing market could begin to re-start. Construction workers were encouraged to return to work from 11 May, and non-essential house moves and viewings were allowed from 13 May.

This led to a record level of growth in construction output between May and June of 23.5%, although output remained nearly 25% below the levels recorded in February 2020 . Post quarter-end, in a bid to boost the housing market the Chancellor announced a temporary rise in the Stamp Duty threshold, effective from 8 July.

Annual and monthly inflation rates for construction output prices were both 0.0% in June. This is the lowest annual inflation rate reported since records began in 2015 . Overall inflation, as measured by the Consumer Prices Index, increased by 0.6% in the 12 months to June 2020, and by 1.0% in the 12 months to July.

Estimates from the Office for National Statistics suggest that the number of payrolled employees in the UK reduced by around 730,000 in the period between March and July 2020, with the claimant count increasing by nearly 117% in the same period. In June, around 7.5 million people were estimated to be temporarily away from work or furloughed .

皇冠体育app Coronavirus Job Retention Scheme, which allows employers to claim grant to cover the salary costs of furloughed workers, will end on 31 October 2020, with the amount of grant available under the scheme reducing from the previous level of 80% of wages, to 70% during September and then to 60% during October. Additional financial measures have been announced by the Chancellor in an attempt to safeguard jobs , however it is widely anticipated that further increases in unemployment will occur once the furlough scheme comes to an end. Latest forecasts from the Bank of England suggest that unemployment will peak at around 7.5% in quarter four of 2020 .

皇冠体育appre continues to be material uncertainty over the future course of the coronavirus pandemic and the economic conditions that will follow. A second wave of the virus is possible, as are further restrictions on movements; either at a national or a localised level. Providers will need to constantly monitor performance and forecasts and be ready to react as necessary to the rapidly changing environment.