After a great few days at the NHF Finance Conference in Liverpool, here are some of the key messages that we picked up:
1. The biggest risk of a no-deal Brexit, for RPs, is a nose-diving economy that will have a knock-on impact on wages, living standards etc. RPs should ensure that they have properly stress tested what they will do in such a scenario with clear contingency planning.
2. Strategic partnerships with organisations such as Homes England will become increasingly important for the acceleration of development.
3. To ensure that you can sell, and secure funding against, units built using non-standard methods of construction Valuers need to see good technical due diligence - particularly around the ongoing maintenance costs and the likely longevity of the buildings. The acid test is usually the retail mortgage market: Will individual buyers be able to get mortgages?
4. For high rise buildings, expect intrusive, forensic due diligence into cladding systems and for their value to be adjusted accordingly.
5. There has been a huge fall in transaction volumes in London, and this isn’t expected to pick up significantly in the next 5 years.
6. For-profitRPs are here to stay but they do not have to be viewed as a threat to the NFPRPs.
7. RPs should be wary of being overly reliant on s106 supply as we are facing a further downturn in the market.
8. Stress-testing and risk management are top priority for the Regulator – with IDAs moving to take place on a bi-annual basis.
9. Rating downgrades (by Standard & Poors) in the past 12 months have generally been because of exposure to open market sales.
On the whole, the messages from the conference were positive and upbeat, despite the current economic and political uncertainty. The sector is embracing the challenge to develop new homes, and working collaboratively with the public and private sectors to deliver these at scale. There are opportunities (particularly around land acquisition) resulting from the prevailing climate, although decisions must be properly assessed for risk.
Please do contact us to discuss further.
"Why invest in HS2 when you can invest in housing?" Vicky Pryce