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With the UK housing market currently in a state of turmoil, the Housing Corporation has carried out a survey seeking the views of the country's top 100 developers. The report from the Corporation's second survey , undertaken in April 2008, is published here: "The emergence of serious problems in international credit markets over the past year, combined with the slowdown in the UK residential property market, means that housing associations are facing challenging times. "However demand for affordable homes is at an all time high – a fact recognised by the Governments £8.4bn three-year investment programme which should raise the number of homes for rent built each year from 30,000 in 07/08 to 45,000 by 10/11. "We believe that the sector overall and the vast majority of associations are well placed to weather any downturn, however, the significant levels of private finance and the increased importance of shared ownership sales means that some organisations could be significantly exposed. "It is our view that this will not lead to failure or insolvency but could result in some restructuring in the market leading to new mergers, consolidations and/or, we could see a slow down in development activity until the housing market achieves stability. "In April 2008 the Housing Corporation undertook a second survey of the 100 largest developers. As with our earlier survey in January we sought to ascertain views on the funding and housing markets. "The immediate concern for housing associations remains the performance of the housing market, rather than their ability to obtain finance at a reasonable price. "There is now evidence that margins on variable rate debt are increasing, and the number of potential funders is dwindling. But as we observed in January one of the paradoxes of the current situation is that long term debt (25 years) is still relatively cheap. "Our April survey confirmed that most associations have facilities that stretch for almost two years worth of projected drawdowns. A small number of associations are intending to raise new debt. "Our survey shows that of the £4.7 billion associations intend to spend in the next 12 months, only £0.7 billion is new debt which has still to be arranged. We have followed up this work with individual discussions with associations and lenders. "From a position a year ago where there were seven active lenders all competing to offer finance at rates of 30 basis points or less above LIBOR we now have a situation where the number of lenders has reduced and LIBOR has become dislocated from the Bank of England base rate – at the current time by nearly 100 basis points. "Associations have not seen the further reductions in Bank Base rate result in keener pricing. "Credit committees are now taking a much tougher line in their dealings with the sector and associations should not be overly relaxed about having facilities in place unless they are certain that the conditions precedent in loan agreement are met at the point when finance is needed.

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