'Social housing sector represents good risk for investors' after surplus increase of £0.7 billion

Published by Max Salsbury for 24dash.com in Housing and also in Finance

The social housing sector recorded a £1.8 billion aggregate surplus in 2012 - a £0.7 billion increase on 2011.

According to the Homes and Community Agency’s (HCA) 2012 Global Accounts of housing providers, the increase was achieved through the combination of increased turnover attributable to inflation linked rent increases and improved financial performance in housing sales activity exceeding increases in the sector’s operating costs.

In total, reserves increased by £2.3 billion to £20.7 billion, whilst the total net book value of the sector’s fixed assets increased by £5.7 billion to £71.1 billion.

As of March 2012 the sector had re-invested 88 percent of its total reserves into its fixed asset base, including spending on new supply and improvements to existing stock.

According to the HCA, the sector has continued to raise the significant levels of debt needed to deliver new housing, representing a good credit risk for investors.

The sector in aggregate raised an additional £3.4 billion of debt, including £1.8 billion raised in bond issues, representing an increase in bond issuance of over 90 percent compared to the previous year.

Other financial highlights include:

• turnover rose by nine percent to £13.8 billion
• total operating costs increased at a lower rate of six percent to £10.5 billion
• management costs per unit increased by four percent, following two consecutive years of decreases
• total major repair costs per unit increased by 14.8 percent, also reversing a trend of decreased per unit spending in the previous two years
• routine and planned maintenance per unit costs fell by three percent, for the second year running
• major repairs spending totalled £2.6 billion, an increase of 16 percent, as the sector continued to invest in its stock

Mick Warner, deputy director of regulatory operations at the HCA, said: “The accounts illustrate that the strong performance of the sector in 2010-11 has continued into 2011-12.

"This year saw providers having to contend with continued uncertainty in the financial and housing markets on which the sector relies for its future growth, meaning that they had to combine robust operational management with a focus on risk exposure.

“Changes resulting from the implementation of welfare reform will see a changing profile to the certainty of rental income flows and as reforms are implemented, it is imperative that the sector ensures it maintains its current operational performance.

“Looking ahead, whilst the financial results indicate the sector is responding well to the current economic environment, it is vital that boards remain focused on the range of challenges and risks and continue to manage them effectively.

"As regulator, we will continue to seek assurance that providers are managing these challenges effectively to ensure that economic standards are met.”