Friday, April 11, 2008

How well will housing associations be able to digest the credit crunch?

Yesterday I went to an excellent seminar for housing association audit committee members run by KPMG’s Audit Committee Institute. One of sessions was delivered by the Housing Corporation’s head of financial regulation. He spoke about the financial health of housing associations. It was somewhat depressing hearing his summary of the sector's Global Accounts. He noted the pressure on association’s operating margins and their heavy reliance on profits on property sales.

It is rumoured that there are only two lenders in the housing finance market. (And, of course, the margins are higher and expressed over the inter-bank rate LIBOR.) This week Inside Housing is reporting the lenders' loss of appetite. This will hopefully change once the credit crunch passes - eventually. If housing associations struggle to sell shared ownership (and outright sale) new build, they may also lose interest development.

Housing associations (including their boards) need to watch this very closely although there scope for action is fairly limited.

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