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Housing associations buy up discounted homes from builders amid Brexit uncertainty
Housing associations are buying up new build homes from private builders at discounted rates, as they look to offload stock amid Brexit uncertainty in the housing market.
Inside Housing has learned builders have sought out large housing associations in recent weeks to offer difficult-to-sell homes at discounts of up to 15%.
The homes are being converted into affordable properties using government grant – but the move is a major sign of the growing uncertainty around Brexit and the stagnating market hitting house builders’ plans.
Some are understood to be bolstering sales numbers before year end results.
James Gibson, development director of Sovereign Housing Group, said that over the past five years there had been little interest from developers in selling stock, but this had increased in the months before Christmas, with Sovereign agreeing terms on around eight deals.
He said nervousness caused by Brexit was leading developers to offer unsold plots or pre-sale homes to the sector to reduce sales risk.
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Another housing association development director, who preferred not to be named, said the association had been “filling its boots” on deals at reductions of 15%, and had already agreed a number of deals with builders, including a full block in the South East.
The association had converted the homes into shared ownership properties, using Homes England grant. Inside Housing understands other homes have been converted to affordable rent and even social rent properties using government grant.
Mr Gibson said the grant had helped to “open doors” for the acquisitions.
Mark Perry, chief executive of Vivid, said that he had seen more offers compared to previous years, but said it had been “a few rocks moving, rather than a full-fledged avalanche”.
However housing associations operating in the Midlands, the South East and South West told Inside Housing they had yet to receive offers of this kind.
Two London housing associations also said they had yet to see developers and house builders offering up additional stock at a cut price, with demand for housing in the capital still high.
Yesterday, Taylor Wimpey confirmed that it had agreed a bulk deal to sell stock to a registered provider in December.
Speaking to analysts, Peter Redfern said the deal was "relatively unusual" for the company but came during a period of uncertainty, and helped to make the company’s order book as strong as possible.
He said the deal "did not fill a gap" and said even without the deal it would be well ahead of its year-on-year sales rates.
Following the financial crash in 2008, there was a mass sale of properties by developers to housing associations at as much as 30% below market price as the market fell.
Land Registry figures show sales rates fell in 241 of 374 local authority areas in 2018, while research by the Royal Institute of Chartered Surveyors (RICS) found last month that the UK property market was at its weakest for six years.
Property expert Henry Pryor said he had seen reductions by house builders and developers but said that was a marker of the property market, rather than Brexit.
He added: “Housing associations haven’t had any of these offers coming over the past few years because the market has been robust, and underpinned by Help to Buy, there was no need to sell at anything but maximum profit.”
Stewart Baseley chairman of the Home Builders Federation, which represents house builders, said: “The new homes market remains resilient to the wider economic uncertainties and all indicators suggest this will continue. Builders have always worked in partnership with housing associations to deliver a broad mix of tenures on developments to create sustainable mixed communities.
“Companies will continue to explore all such opportunities as they look to increase output further and will enter into deals when the terms are right.”
