What Falling House Prices Mean for Social Landlords

With Nationwide reporting a consistent fall in house prices back in April, the seventh consecutive month, questions are being raised about what this means for social landlords and how it will impact the sector. 

After dropping at the fastest annual pace for 14 years, the lender Nationwide reported that all regions saw a slowing in price growth in the first quarter of 2023, with most seeing small year-on-year falls.

Based on further data from other lenders such as Lloyds Bank, there has been a consensus that house prices will fall by 7% this year, although Santander has issued a harsher 10% dip. 

In a separate interview Robert Gardner, Chief Economist at Nationwide, says the housing market “reached a turning point” last year because due to the financial market turbulence which followed former prime minister Liz Truss’ Mini Budget.

Housing affordability will remain stretched

Despite this, he stated: “Housing affordability also remains stretched, where mortgage rates remain well above the lows prevailing at this point last year.” While this is causing issues for homeowners, there are also knock-on implications for social landlords across the UK.

Parts of the sector are extremely exposed to market valuations through housing stock sell-offs and shared ownership. This exposure is disproportionate to different regions of the UK, with the south seemingly avoiding the brunt of the fall. 

In the Central South regions, there is a feeling of insulation from the overall trend in the sector, where smaller down valuations are being recorded and, in some areas recording a growth of 1-2%. 

Worries over homelessness as demand continues to surge

This could be an example that the trend is maybe swinging back towards a growing market, which is good news for social landlords. The reasoning behind this is due to a growing demand for shared ownership. 

Growing demand is likely due to the fact people can’t afford a full deposit for an outright sale, compared to if they were purchasing property previously.

Potential homelessness is also a concern for the social housing sector, with many industry leaders expressing issues surrounding the growing demand for social housing. People will be prioritised over others, which will potentially see an upturn in the levels of homelessness. 

With slowing or falling prices, some social landlords are currently picking up new opportunities for development – and others are keeping a watchful eye.