Quarterly survey for Q4 (January to March) 2022 to 2023

Published 1 June 2023

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1 - This Quarterly survey report is based on regulatory returns from 202 private registered providers and PRP groups who own or manage more than 1,000 homes.

2 - The survey provides a regular source of information regarding the financial health of PRPs, in particular with regard to their liquidity position. The Quarterly survey returns summarised in this report cover the period from 1 January 2023 to 31 March 2023.

3 - The regulator continues to review each PRP's 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, or there is an increasing exposure to risks from activities carried out within non-registered entities. Further assurance may also be required on covenant compliance. We have assurance that all respondents are taking appropriate action to secure sufficient funding well in advance of need.

4 - Figures have been rounded to the nearest £billion to one decimal place. This can result in rounding differences in totals and percentages as the individual returns are denominated in £000s.

Liquidity remains robust, however cash balances at lowest level in almost eight years

A further reduction in 12-month cash interest cover and lowest amount reported in eight years – Total outturn repairs and maintenance spend significantly up on levels recorded earlier in the year, with capitalised repairs at highest level since 2015

Income collection indicators stable however marginally worse than comparative Q4 2021/22 figures

12-month major repairs spend forecasts remain high as delayed works are reprofiled and building safety and energy efficiency works are planned. An increase in forecast non-capital repairs and maintenance spend reflects the prioritisation of damp and mould works. 12-month development spend forecasts increased from previous quarter, driven by for-profit organisations

AHO completions are the highest ever recorded – Market sale pipeline falls to the lowest level in eight years

AHO sales behind completions during the quarter leading to increased unsold stock – Increase in market sales activity. Margins have fallen on both AHO and market sales.

5 - The quarter to March 2023 continued to bring inflationary pressures and economic challenges to the housing sector. Although inflation is expected to fall over the year ahead [footnote 1] , PRPs continue to face increasing pressure on resources and demand to invest in both new and existing stock. In recognition of the multiple priorities facing housing providers, on 28 March the Levelling Up, Housing and Communities Committee launched an inquiry into the finances and sustainability of the social housing sector in England [footnote 2], which seeks to understand the impact of these demands upon providers’ financial viability and the resources that will be needed to fulfil them.

6 - UK Gross domestic product grew by 0.1% in the quarter to March 2023, following a monthly reduction of 0.3% between February and March. Monthly GDP is now estimated to be 0.1% above the pre-coronavirus levels recorded in February 2020 [footnote 3]. Latest forecasts from the Office for Budget Responsibility estimate that GDP will contract by 0.2% in 2023 [footnote 4], however a recent statement from the International Monetary Fund [footnote 5] suggests that the economy will grow by 0.4% over the year, avoiding a recession.

7 - Overall inflation, as measured by the Consumer Prices Index, rose by 10.1% in the 12 months to March 2023 [footnote 6]. Annual inflation peaked at 11.1% in November 2022, and apart from an increase in February, has been decreasing since then. The Bank of England is forecasting inflation to fall to 5.1% by the end of 2023, and to reach the 2% UK target by the end of 2024 [footnote 7]

8 - During the quarter the Bank of England announced further increases in interest rates. Base rate rose to 4.00% on 2 February, and then to 4.25% on 23 March. Post quarter-end, a further increase to 4.50% was announced from 11 May, bringing the rate to its highest level in almost 15 years [footnote 8].

9 - The average interest rate for a typical 5-year mortgage stood at 4.27% at the end of March. Rates peaked at 5.61% in October 2022 and have been reducing gradually since then [footnote 9]. Mortgage approvals for house purchases reached 52,000 in March, significantly higher than the 44,100 approvals recorded in February, but below the monthly average of 62,700 during 2022 [footnote 10].

10 - Overall construction output increased by 0.7% in the quarter to March 2023 when compared to the previous quarter. This was driven by a rise in repair and maintenance work of 4.9% (including both housing and non-housing works), offset by a reduction in new works (including new housing, infrastructure, and commercial works) of 1.9%. Private new housing works fell by 5.3%, and private housing repairs and maintenance works increased by 5.7% [footnote 11].

11 - Prices in the construction industry are estimated to have increased by 8.5% in the year to March 2023. The overall increase includes annual growth in the price of new works of 10.6%, and in repairs and maintenance works of 4.6% [footnote 12].

12 - House prices in England increased by 4.1% in the year to March 2023, reaching an average of £304,193 [footnote 13]. The largest annual increase was recorded in the South West (5.4%), and the smallest was in London (1.5%).

13 - The unemployment rate for the quarter to March increased by 0.1 percentage points to reach 3.9% [footnote 14], and the number of job vacancies fell by 47,000 to 1,105,000 [footnote 15]. The total number of people claiming Universal Credit in England was around 5.1 million in March, compared to 5.0 million in December [footnote 16].

14 - As providers move into the new financial year, they will need to balance the requirements to maintain stock decency and complete remediation works with the need to invest in decarbonisation measures and the construction of new homes. With increased costs and a 7% rent cap in place, providers will have reduced financial flexibility to respond to further challenges. Providers must be able to identify areas where covenant headroom or liquidity may be restricted and ensure that contingency plans and mitigations remain robust.

Monetary Policy Report - May 2023 Bank of England ↩

Levelling Up Committee launches inquiry on social housing finances & sustainability - Committees - UK Parliament ↩

GDP monthly estimate, UK - Office for National Statistics ↩

Economic and fiscal outlook - March 2023 - Office for Budget Responsibility ↩

United Kingdom: Staff Concluding Statement of the 2023 Article IV Mission (imf.org) ↩

Consumer price inflation, UK - Office for National Statistics ↩

Monetary Policy Report - May 2023 - Bank of England ↩

Interest rates and Bank Rate - Bank of England ↩

Quoted household interest rates - a visual summary of our data - Bank of England ↩

Money and Credit - March 2023 - Bank of England ↩

Construction output in Great Britain - Office for National Statistics ↩

UK House Price Index summary: March 2023 - GOV.UK ↩

Labour market overview, UK - Office for National Statistics ↩

Vacancies and jobs in the UK - Office for National Statistics (ons.gov.uk) ↩

Total number of people on Universal Credit in England - LG Inform ↩

Liverpool Could Sign Bellingham 2.0 In £36m

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Quarterly survey for Q4 (January to March) 2022 to 2023