HCA has published the 2015 Global Accounts, which shows that the social housing sector remains financially robust.
The accounts published show that the social housing sector delivered a solid year of balance sheet growth, underpinned by a strong financial operating performance. There was an increase of £7.1Bn in the value of housing properties, taking it up to £138Bn, with a debt increase of £4.1Bn and a surplus of £3Bn recorded in the year.
The £7.1Bn growth in the value of housing properties is predominantly driven by the development of new properties. The growth in housing properties was funded primarily through debt and the re-investment of operating surpluses supplemented by grant of £0.5Bn
Capital investment in major repairs in existing properties was £1.9Bn. Housing properties with a book value of around £1.2Bn were sold, reducing the value of the properties on the balance sheet, but providing significant cash receipts for reinvestment.
The strength of the housing market has underpinned a significant proportion of the 2014/15 surplus supporting the sector’s new build activity for shared ownership and outright sale. Development for-sale has a turnover of £2Bn for the year 2015, showing a considerable increase.
The Global Accounts publication includes analysis of the delivery of market supply through providers’ unregistered subsidiaries, showing the full extent of the sector’s diversification into a range of commercial activity. Furthermore, the surplus on sales of fixed assets was over 20% of the overall reported surplus.
Primarily in the form of bank loans, the total balance of drawn debt was £63.4Bn, with new debt increasingly being raised in the capital markets. As a result of the increase in debt, there was a modest increase in gearing.
Sector turnover increased by 4.1% to over £16Bn. The majority of the increase came from the core social housing lettings activity, which was responsible for 84% of turnover. The operating margin also increased from 26% to 28% as costs increased by less than revenues.
Fiona MacGregor, HCA’s Director of Regulation said: “The sector has benefitted from a range of favourable macroeconomic conditions in recent years and it is encouraging to see that the sector overall remained in a solid financial position.
“Whilst financial performance is strong in aggregate the performance of individual providers inevitably varies, and there have been a range of changes to the operating environment, such as the rent reductions announcement, since providers completed these 2015 accounts. As the environment changes, the regulator will continue to monitor the sector as a whole and engage with individual providers to gain assurance that those changes can be effectively managed and mitigated, ensuring that providers are financially viable and well governed.”