HIPs a shame for the property market?

Property prices continue on their downward trend in September for the third month in a row. This downward trend is evidenced from figures released from Nationwide, Halifax and today RICS and certainly not the news those who recently enetered the market will be wanting to hear.

RICS today reported in their now familiar bewildering manner and seemingly supported property flooding onto the market. Its monthly survey showed; a balance of 36% more surveyors reporting price falls than price increases, down from a net balance of -32 in August. In addition 41% more surveyors expected to see price falls in the coming months, up from a balance of 38.

In August, the average property lost more than £6,000 of its value of as the average price fell from £168,124 to £162,092, the biggest fall since 1983. Most commentators agree it is due to rise in supply of properties and a drop in demand.

Martin Gahbauer, chief economist, Nationwide said,

“Although the Halifax index showed a large drop in September, the less volatile three-month on three-month measure showed a drop of 0.9pc, the same as in the Nationwide index. This compares with three-month on three-month declines of more than 5pc in the deepest phase of the 2008 downturn in both indices. As such, the current declines are still on the modest side. None the less, market conditions have clearly loosened as more sellers have marketed their properties and buyer demand has remained weak. This may exert additional downward pressure on house prices in coming months. At this stage there is limited evidence of widespread distressed selling. Without more of this, price declines of the magnitude in 2008 are unlikely.”

Whilst our experience can be considered anecdotal for sure in comparison to the large above mentioned nationwide studies, our business has certainly seen an increase of properties coming to market since the removal of HIPs in May of this year. However, the number of sellers have increased but so has the number of sellers who tell us they are simply testing the market or describe a questionable desire to actually sell. We rarely witnesses this whilst Home Information Packs were in place.

Could the contributory effect of the suspension of HIPs not have been forecast and managed in a more controlled manner? We certainly expressed our direct concern back in June ‘ Speculative Sellers Return, Hip Hip Hooray’ and in previous articles the then shadow housing minister Grant Shapps’s office engaged in.

Home Information Packs were certainly not perfect, though one of their many benefits that was often overlooked was their ability to create a small barrier to enter the property market. This barrier was simply not an issue for anyone who was serious about selling their home but prevented those who could be considered by some as timewasters and not productive to a healthy property market.

Whilst there were thousands employed in the HIP industry of which many lost their income stream in an instant; there are substantially more who are now facing large amounts of negative equity for whom it is worth sparing a thought for as prices continue to fall. We do wonder if the same level of joviality shown by Grant Shapps, Eric Pickles and Kirtsty Allsopp (which we ran a caption competition on) in one of the photos from the day they scrapped HIPs would be displayed to those who are now forced to deal with potential repossession.

Where do house prices go from here?

And If we did have full control where we choose for the housing market to go next?

When will see the start of the re-invention and re-incarnation of the Home Information Pack?

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3 Responses to “HIPs a shame for the property market?”

  1. […] This post was mentioned on Twitter by Paul Sailes and Sharon Crossland , Hilary Grayson. Hilary Grayson said: RT @hipconsultant: HIPs a shame for the property market? http://bit.ly/9roJ2M <<was I a little harsh? […]

  2. Scrapping HIPs overnight – one of the first acts of the Tory Government, and of Grant Shapps in particular, showed appalling judgement, was grossly insensitive, and almost certainly illegal.

    Shapps claimed that he had to scrap HIPs for the sake of the housing market, and subsequently suggested the increase in properties coming to the market was evidence that his plan had worked. What he chose to ignore was that few of these new properties (or the homes already on the market) were selling – all he had achieved was allowing more people to NOT sell their home. He did nothing to address the real problem – poor mortgage availability.

    What was so obvious, and therefore demonstrates his woeful judgement, was that encouraging thousands more sellers to the market, yet not allowing buyers to access finance, was the perfect recipe to trigger the second part of a double dip house price drop. Almost everyone else in the industry could see this coming, so why couldn’t Shapps?

    The gleeful way in which he and his colleagues announced the suspension showed incredible insensitivity to the thousands of people whose livelihoods depended on the HIP industry. Our own small firm had to make 3 people instantly redundant – they are each still experiencing financial hardship as a result.

    Some claimed that most people in the industry were Energy Assessors, and since the EPC was still required they would be unaffected. What I predicted at the time was that the removal of the HIP ‘wrapper’ meant that the price focus fell entirely on the EPC, and this is exactly what has happened. Subsequently, EPC fees have dropped even lower than the barely sustainable level they were at when the HIP was required, meaning even the DEAs who managed to keep their work have probably had to take a loss in income.

    The other massive, and entirely predictable, impact on the overnight scrapping was on the various suppliers to the HIP industry – as well as Energy Assessors, companies providing Local Authority Searches, Water Searches, IT, printing, etc etc were also badly affected. Our HIP business experienced a 90% drop in turnover overnight, and had to cease trading within days. Since we were anticipating HIPs being scrapped later in the year, we had been investing all our income into a new, Shapps proof, business, and consequently had very little in the bank. How was our, or any young business experiencing rapid growth, supposed to be able to deal with an instant culling and still be able to meet our obligations? One of my greatest regrets has been that we were unable to pay all our creditors, but the Tories were no more concerned about this than they were about the staff we had to lay off.

    I’m not suggesting that HIPs should stay for good of those in the industry. Personally I believe that HIPs should have been improved rather than scrapped, but I accept that the new Government had a right to implement their own policies. What they should have done, though, was stick to their promises and allow the industry to plan its closure. In December 2009 Grant Shapps confirmed that the Tories would scrap HIPs, if elected, but would carry out a 3 month review first. This is what we, and most of the rest of the industry, expected and planned for. Had the review been implemented it would have allowed us to wind the business down, pay all our creditors and start our new business with the funding we had planned for. Because the business was pulled from under our feet, this planned withdrawal was impossible, and the whole experience was very painful for everyone involved.

    The Housing Act, the legislation which introduced the HIP, allowed for its immediate suspension in ‘exceptional circumstances’. What were the exceptional circumstances that Shapps used to destroy an industry? He says that the rumours surrounding a possible suspension were causing problems in the market. There was nothing exceptional about this – there had been rumours about HIPs being abolished since they were introduced. All that was required to quash the rumour was a clear statement that he would honour his promise of a review before scrapping them. What else was exceptional – a new Government? That happens every 4 years or so – hardly exceptional.

    So Grant Shapps’ first act as a Minister was ill-judged, immoral and illegal (but has presented some great opportunities to get his name in the papers!!). Let’s hope things improve, although his actions since then are hardly encouraging.

  3. The fact is housing costs are to high. We have the lowest rate of interest in 300 years and yet this has had no impact. HIPs removed speculative sellers testing the market, the last few months has seen more of these sellers coming onto the market and as a result they cant sell. Poor mortgage availability is not the reason why houses are selling, the affordability is. We are in this mess now because of cheap easy credit in the first place. The real problem is vastly overpriced houses, deal with that.

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