The Debate: Is the property market really ready for HIPs?

Nov 27 2007 by Vicky Anderson, Liverpool Daily Post

Vicky Anderson looks at the innovation which polarises opinion

THE Government’s controversial Home Information Packs – HIPs – have faced a barrage of criticism from many professionals involved in the property market.

Their implementation was dogged by problems, then delayed and finally phased in.

Just last week, a prominent Liverpool solicitor described them as “pointless” as it was announced by housing minister Yvette Cooper that they would be rolled out to all properties from December 14.

HIPs came into force for homes with four or more bedrooms in England and Wales on August 1, and three-bedroom properties on September 10.

The Government claims HIPs will speed up the house-buying process by giving potential buyers more of the information they need up front.

Ms Cooper said: “Information such as searches for which they would previously have had to pay will now be included in the HIP paid for by the seller, reducing the costs of the first step on to the property ladder.”

But Phil Rees-Roberts, principal of Liverpool based property law firm Rees-Roberts Solicitors, said: “The introduction of HIPs is pointless. When the Government dropped the Home Condition Report aspect of the HIP, it became toothless.

“Energy Performance Certificates (EPC) are now positioned as the main reason to introduce the HIP but they will inevitably come into force as a result of EC legislation by January 1, 2009, anyway.

“The remaining HIP content is legal information produced by solicitors, which has little relevance to the lay purchaser and won’t add anything at the offer stage.”

This week, the Daily Post asks: Is the property market really ready for HIPs?

vickyanderson@dailypost.co.uk

NO: The case Against - HIPs are showing they have very little purpose

by James Kersh, Sutton Kersh estate agents

THE new HIPs, in my view, have been shown to have very little purpose.

Research has shown that as few as 10% of buyers purchasing a three or four bedroom house (for which HIPs are now mandatory) have bothered to read the pack before making their offer.

The slow, drawn out process by which the packs are being introduced hasn’t helped.

If anything, it’s creating mass confusion in the market.

The uneasy climate in which the housing market is currently operating is not helped by the added confusion of HIPs.

In fact, the Government couldn’t have chosen a more precarious time to make the introduction.

At least the market is set turn in spring 2008, it’s just that we don’t need another dynamic trying to stifle the market. Moreover, we need levers that can boost, not drag out, the “plateau” further.

Speculative vendors are also being discouraged from testing the market. Some agents may argue this is a good thing as they have fewer “time-wasters” on their book. However, speculative buyers often end up selling their property and so this income is being removed from the market due to the cost and hassle of HIPs.

Perhaps most importantly in considering future generations, the Royal Institution of Chartered Surveyors (RICS) had already warned that first-time buyers could struggle even more if the Government proceeded with proposals to extend Home Information Packs (HIPs) to include smaller properties.

RICS said there could be a considerable decline in the number of one and two bedroom homes put up for sale if the Government went ahead with plans to extend the controversial packs to cover such properties.

RICS forced the Government to delay a full roll-out in the early summer by launching legal action against the packs, and said an extension would further limit the supply of homes on the market and drive prices up.

Following the launch of the packs in August, RICS claimed that the amount of properties up for sale had declined by 50% during the month.

Furthermore, in October, RICS claimed that 67% of chartered surveyors had seen a decline in the percentage of houses with three or more bedrooms on the market during the month compared with the same time last year.

Doesn’t this say far more than I ever can as an authority on the subject?

I believe that HIPs are an absolute waste of time. They are an irrelevance and an unnecessary cost. This is supported by the rejection by buyers.

I believe that the Government should scrap HIPs and concentrate more on instilling confidence back into consumers in an attempt to raise the buying and selling activity in the market.

YES: The Case For - HIPs announcement removes lingering uncertainty

by Angela Hesketh, head of residential property at Homeplus

THE Government has announced that Home Information Packs are to be rolled out to all properties going onto the market for sale, with effect from December 14.

This announcement should finally remove the ongoing uncertainty and conflicting information which has followed the introduction of the packs.

The main reason for the packs was to promote certainty and a better flow of information into the housing market by producing good quality information up front when a property is placed on the market for sale.

However, with the phased introduction of packs, they have continued to be viewed with suspicion and the constant suggestion from members of the industry that the packs may ultimately be scrapped.

Many members of the public still have very little knowledge or faith in what in my opinion is one of the most positive changes in the house moving process for a decade.

The present procedure, involving chains of transactions, often suffers from a lack of information flow which can ultimately result in the collapse of a chain, which in turn is costly to the many individuals within it.

The collapse can and does happen at any stage up to exchange of contracts, as no party is bound to the transaction until exchange takes place. Buyers throughout the chain spend a significant amount of money on searches and surveys, all of which can be lost.

The introduction of packs across all properties means the cost is spread more evenly, with searches provided by the seller, rather than being the sole responsibility of the buyer.

It also means that, within the near future, all properties within a chain of transactions will have useful information up-front at the time a sale is agreed.

This will promote a better flow of information at the outset and should result in a reduction in the number of chains falling through.

I feel this is first step towards a return of confidence in a housing market which has suffered tremendously over the past six months from many factors – including interest rate hikes, credit crunch and the subsequent removal of many mortgage products from the market place.

The market is crying out for positive steps and this I see as the first of many.

Consistency and stability across all properties being placed on the market can only lead to reassurance for buyers and sellers alike.

We can now move away from “will they ever really catch on?” and deal with the real aim of the packs – to improve our home buying and selling process. As an industry leader in providing conveyancing legal services, this is my main concern and wish for our clients.