What happens to house building if there is a slump in house prices?

It is this it is at this time of year that that many housing associations publish their results for the past year. The housing press is full of the size of their surpluses.

Finance directors are to the fore, no doubt positioning themselves for their next career move or bonus package, boasting about the increase in their surpluses.

Of course generating surpluses is now essential in order to deliver ones development objectives. However, I do wonder whether housing associations are stacking up trouble for themselves. I have previously written about the reputational risk that the largest housing associations face if they do not deliver on the government’s expectation that they become the developers for the nation.

When a government has an objective to see one million new homes, a fall guy is needed when they fall short. And when there is unrest because of social exclusion and the loss of services, which is the only sector that boasts about how well it is doing, that boats of surpluses of £3 billion in 2014/15?

But it is not all wine and roses. The housing regulator, the Homes and Communities Agency, is asking questions about the exposure of many housing associations whose surpluses are, in part, down to developing homes for sale.

The Brexit vote has led to predictions that house prices might fall and the regulator, which has previously welcomed the bumper surpluses, is now worried that associations might not be able to sustain their plans should be a significant fall in surplices.

In 2014/15, housing associations made £2.1 billion of their £3 billion surplus from sales. If house prices fall (sadly, highly unlikely in my opinion), housing associations will see reduced surpluses and their ability to build will be curtailed.  I hope the government has a Plan B for house building.


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