Joy over HIPs short-lived as job crisis looms

The coalition government set out in its joint agreement earlier this week its intention to scrap Home Information Packs, while retaining Energy Performance Certificates.

While the industry is erring towards delight at the news, with many saying it will improve the housing market, others have warned there will be costly consequences for the industry with jobs on the line.

The initial purpose of HIPs was designed to speed up the home-buying process and prevent people pulling out of purchases further down the line.

But Nicholas Leeming, commercial director of property portal Zoopla.co.uk, said: “The packs were ultimately diluted to the point where buyers and mortgage lenders did not have the vital information they needed – such as a structural survey – and they’ve been on borrowed time ever since.”

Mike Ockenden, director general of the Association of Home Information Pack Providers, said: “Scrapping HIPs will mean the government loses all the benefits of HIPs which include a reduced cost to consumers, shorter time to exchange of contracts and lower transaction failure rates, not to mention the £100m HIPs generate in VAT.”

But Peter Bolton King, National Association of Estate Agents chief executive called the packs “pointless” and said sellers had to shell out hundreds of pounds on “regulation that benefits no one”.

Ockenden says the manifesto commitments outlined earlier this week suggest the government will go ahead with scrapping HIPs, the question is how they do this and when.

He said: “We expect the government to abide by the previous commitment made by current housing minister Grant Shapps, to go through a proper consultation on the scrapping of HIPs. Were they to take action to abolish the packs immediately, the government can expect us to take legal action against them.”

The property industry does not want any delay and Peter Bolton King warned that failure to implement the decision quickly would confuse consumers and the housing market.

Leeming added: “The government must act quickly to scrap HIPs, as a delay may cause homeowners considering selling to wait before putting their homes on the market. A reduction in the supply of homes for sale at this crucial stage in the housing market recovery would harm the revival.”

Industry Fallout

Ockenden says scrapping the packs makes no sense for any government. He says that anywhere between 3,000 and 10,000 jobs will be lost or seriously affected if the packs fall by the wayside, and added: “At a time when the government’s priority is to cut public sector spending, they’re talking about putting at least 3,000 people on the dole.”

Dominic Toller, managing director of PropertyEarth.net, shares the same concerns.

“There is a whole industry of people whose employment relies on HIPs – one has to have some sympathy for them as they are about to join the queue of unemployed people looking for work and not through any fault of their own.”

Estate Agents Rejoice

Those in the property industry have lauded the government’s announcement though.

The NAEA has campaigned for HIPs to be scrapped, arguing that they have failed to benefit home buyers and actively discouraged sellers.

Dominic Agace, chief executive of estate agents Winkworth, said: “‘Abolishing HIPs is generally welcomed and is likely to have a positive effect on property supply, particularly for speculative sellers who may have been deterred by having to pay upfront for the pack.”

Zoopla commercial director Nicholas Leeming agreed. He said: “Sellers see them as an annoyance, buyers don’t ask to see them and solicitors often refuse to rely on the information they contain. In an environment where property transactions are still far too low, any additional expense that makes sellers think twice about putting their homes on the market is not welcome.”

AMI director Robert Sinclair said: “As someone who’s just sold their house I would say HIPs were a pain, not a benefit.”

EPCs

Energy Performance Certificates, currently contained in the HIP, will be retained as a standalone document.

Leeming said this was an environmentally positive move, “but it is more about complying with EU directives on reducing carbon emissions than helping home buyers and sellers".

And he added: "Buying a home is an emotive process and the energy efficiency of the property will have little influence on the vast majority of buyers.”

Sinclair said that EPCs would come into their own when governments start to levy tax on the energy performance and carbon output of properties.

The Future

Nicholas Leeming wants the new government to consider replacing HIPs with a simple pre-sales pack to include local searches and a draft contract for sale only, but Ockenden, director general of AHIPP, thinks the government should take this as an opportunity to create something better than a HIP.

He advocates an “exchange ready pack” to help lawyers move the house buying process along faster. This would include all legal documentation required to transfer a property, including a contract and the seller’s disclosure forms.

He said: “These documents all have to be produced anyway, why not have them up-front?”

Ockenden added that he thought estate agents would have no problem with this so long as it did not prevent them from marketing the property on day one.

Nigel Lewis, property analyst at portal Findaproperty.com, said in his view estate agents would welcome anything that locked down the conveyancing process much earlier in the process.

He said: “I think there’s fairly unrestrained glee in our industry that HIPs are being scrapped. The packs are so watered down they’ve become pointless bureaucracy. Having said that, the original idea behind HIPs of a full report, was always welcomed by the housing industry.

“Regulation that offers a fairer market where gazumping and gazundering are out of the equation would be a very good thing indeed.”

But Robert Sinclair remains sceptical. He added: “Considering the current commitment from the government to cut red tape, I would think it’s highly unlikely they’ll push through regulation requiring more bureaucracy.”