Listed shared ownership investor hit by 10% asset value fall

Housing investor ReSI plc has seen the value of its stock of homes fall by a tenth in just three months in the wake of the market turmoil sparked by the mini-Budget last September.

The listed investment trust – part of a group of companies backed by Gresham House which support housebuilding by investing institutional money into shared ownership housing – said in a quarterly update to the City that its net asset value had declined by 9.9% between September 30 and December 31 last year.

Residential Secured Income plc, known as ReSI, says it now owns 3,303 homes worth £364m. Around 35% of it homes in its portfolio are shared ownership and the rest are retirement and local authority housing. The company’s net asset value, calculated on a European Public Real Estate Association (EPRA) basis, fell from £196.5m, to £174.6m in the period, which is the first quarter of its financial year.

ReSI’s statement blamed the fall on the spike in gilt yields after the mini-Budget, which makes the cost of financing the borrowing necessary for long-term investment more expensive, thereby reducing total potential returns.

It added that part of the decline in valuation was driven by expectations of lower capital price increases, and a reduced appetite for “staircasing” – where shared owners buy up the remaining share of the property – in future.

However, the firm said rent collection remained at 99% during the quarter, with rents increasing by an average of 5.3% on 502 of its properties, equating to a 1% rise in rents overall.

Ben Fry, managing director of housing at Gresham House, said ReSI’s operational performance during the quarter was pleasing, with “strong rental growth, continued high occupancy and good demand for new homes”.

He said: “As with many other REITs and investment companies, the difficult UK macro environment in the last three months of 2022 drove a spike in gilt yields, which has directly impacted our valuations as at the end of December.

“Valuations of course remain sensitive to moves in gilt yields, but we see downward pressure on valuations starting to ease, while inflationary pressures are hopefully nearing their peak.”

He added that mortgage rates were “well below” the levels the business stress-tested the portfolio to.

The update said the business remained well positioned to grow further, with 97% of its rental income “inflation-linked”, and opportunities for shared ownership “accelerating” given housing association interest and “strong” institutional appetite to invest.

The news comes amid continued growth at the business, with linked firm Gresham House ReSI LP last month signing a £40m forward funding deal to buy 167 homes from Countryside in the Langley Park scheme in Chippenham, Iltshire. In December it bought 469 homes from Cornwall-based HA Ocean Housing in a deal designed to support a 1,000-home development programme.