Expert warns social housing values could plumet by 70%
1 January 2023
This article was first published on the Batchelor’s Solicitors website prior to its merger with Birketts.
A real estate expert has warned that a combination of net zero measures, rent caps and spiralling operating costs could result in social housing stock falling in value by almost 70 per cent.
Delegates at the Social Housing Annual Conference heard that a worst-case scenario fall in property values would create significant financial risks for social housing providers.
Richard Petty, Head of UK Living at real estate company, JLL, told housing association senior executives that the modelling was ‘indicative’ rather than a ‘forecast’ with real world valuations varying by region.
Mr Petty said: “When we start seeing some huge falls in value, and possibly as much as 60 per cent, on the EUV-SH numbers, there could be some mitigations, where there is a limit to what we or any valuers can do.
“If we put net-zero carbon costs together with an increase in the discount rates to reflect that increase in the risk and operating environment, we’re looking at sort of 50, 60 or even nearly 70 per cent falls in EUV-SH values.”
Although Mr Petty told delegates he had no wish to be a “prophet of doom”, he warned: “I think we are dealing with a number of issues that we can’t sweep under the carpet any longer, and decarbonisation is one of those.”
Mr Petty said that a change in the rules to allow valuers to include affordable rentals in EUV-SH valuations would be helpful.
He continued: “We’ve been grappling with affordable rents for a long time as a sector. The majority of lenders don’t let us include affordable rental in EUV-SH valuations,” he said.
“That’s madness to leave money on the table. It’s about time that funders recognise that affordable rent is here to stay.”
According to Mr Petty’s calculations, Market Value subject to Tenancies (MV-T) values, which have historically been more volatile, are now predicted to be less risky than EUV-SH and, even based on a 25 per decrease in housing transactions in 2023, if market rents continue to rise, this could result in MV-T values falling by around by four to six per cent.
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The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at January 2023.