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Will HIPs damage the three bedroom house market?

publication date: Sep 17, 2007
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With the launch of the Government’s second phase of its controversial HIPs initiative, the NAEA has warned that the three bedroom homes market is likely to suffer as a consequence. The Association’s August survey of members revealed that following the first phase launch on the 1st August, 63% of agents reported decreases in the number of larger properties on their books over and above the seasonal norm. On average agents reported drops of 37%. Homeowners staying out of the market to avoid HIPs was cited as the main reason for the decrease. The RICS research found similar levels of market reduction.

Peter Bolton King commented: “Our concerns have always been that the introduction of HIPs would lead to a lack of supply following implementation. This was the case with four bedroom homes and is now likely to be replicated in the three bedroom homes market. The next few months will prove crucial in seeing whether HIPs are going to cause the sort of problems we feared.” NAEA members revealed that the average price being paid for a HIP is currently around £350, indicating that in most cases the Pack is being put together without the voluntary home condition report (HCR) element as was predicted. This was potentially the only other useful part of the Pack after the energy performance certificate (EPC). Agents across the country have been demonstrating strong feelings towards the Packs. One NAEA member, based in the East Midlands, commented: “The introduction of HIPs is currently having a severe adverse effect on our market place. We dread to think what will happen as HIPs for three bedroom properties and other homes come into force.” Another agent simply commented: “A complete waste of money and effort. They serve no useful purpose.”

Similar sentiments have been mirrored by a number of estate agents across the country. One agent lamented, “It seems nobody in government understands the buying and selling process at all.” Another commented: “The pack was brought in to reduce abortive costs and achieve a faster exchange of contracts – both of the government’s aims have failed miserably.” Peter Bolton King added: “The most important thing for consumers and the market right now is that the government maintains the right for first day marketing of a property. This has been allowed temporarily and is up for review at the end of the year. We sincerely hope that the Housing Minister will recognise the great importance of being able to market a property straight away and that first day marketing will be extended indefinitely.”

NAEA members have also reported that many of the public are confused, thinking that HIPs had been abandoned and they are certainly taking exception to being told that a pack is required at a cost or around £350. This confusion has surrounded the implementation of HIPs. Over the years the reason for introduction has been cited as “to stop gazumping”, “to speed up the process” and finally to help stop sales falling through by providing up front information. In July 2006, the Minister announced that the Home Condition Report element of the pack was to be voluntary - causing the consumer lobby Which? to remove their support as they felt strongly that this was one of the few elements of the pack that would actually benefit consumers. Despite many Stakeholders continually stating that the remainder of the pack would not help improve the process, the Government pressed on, driven by the need to roll out the Energy Performance Certificate, an element that the NAEA supports. A House of Lords Select Committee and the National Audit Office have both been very uncomplimentary as to the way the implementation has been handled with the latter stating that it intends to carry out a full investigation next year.

Since “H” day on the 1st August, and even accepting it is early days, there has been little evidence that HIPs have helped to sell property and, more importantly, there is still a big question as to how the watered down pack will be of benefit to consumers. The Government feels that the pack will reduce the number of abortive sales but most professionals believe that this will not happen. Sales do not, in the main, collapse because of the Local search or Evidence of Title so why are they required in the pack? This is especially significant since a number of lenders are saying that some conveyancers might not accept personal searches thus negating the whole point of providing the information in the first place.

Millions of pounds later the roll out of HIPs continues apace without us knowing the results of either the earlier area trials or what the true impact is on the consumer and market. Almost all agree that the Buying and Selling Process needs reviewing. Instead of introducing HIPs, what should have happened is that the Energy Certificate could have been introduced on its own. In the meantime, as requested by almost all the major stakeholders, HIPs should be halted and a robust discussion had on ways of really improving the process to the benefit of the consumer. This needs to be wide ranging and include conveyancing and competency standards for agents. The Government, to be fair, have just agreed to consider these matters but this is way too late.