There’s been a surprising amount of hype this week concerning a story that the government in the shape of the new housing minister Grant Schapps has scrapped HIPs. What was reported was that he had signed an order suspending HIPs last Friday and that HIPs would be history within a week. However it’s now come out that this is not actually true (so who said it then?) and that although Schapps wanted to suspend it he’s got problem – if he suspends HIPs that means suspending the energy performance certificate which is required under european legislation.
On top of that a number of groups (The HIP reform group, and AHIPP) are looking at launching a legal challenge if the government does try and scrap them
The only thing that is clear is that a shedload of rumours are being put out, reported and re-reported and at the moment no-one knows for certain what is happening. This is good for no-one as uncertainty causes people to site tight and do nothing which is the last thing the housing market needs.
Why should HIPs be scrapped?
We’ve just had a bit of a brainstorm in the office and we reckon these are the main ‘scrap HIPs’ arguments:-
Barrier to market
– The argument goes that having to stump up £300 or so in order to put your property on the market is a barrier.
– The counter-argument to this is that the market used to contain loads of people who were selling speculatively with a consequence that we used to have an appalling rate of jobs falling through ( about 3 in 10 of every conveyancing job we took on fell through) – if you start with people who aren’t entirely sure that they want to sell then they are just the sort of people that turn round at the last minute and realise they actually wanted to stay put. the plus side of making people put money up before selling their house is that most people selling were serious about it – we saw our fall-through rates drop from around 30% to nearer 13%.
– The second consequence of this is on house prices – the housing market has been steadily recovering (in terms of volumes of transactions) since falling to the bottom of the abyss in August 2008. This comes in fits and starts. People think they won’t sell their house so they don’t put it on the market; there is under-supply – prices rise because of this – people see prices rising and think that it is a good time to sell so they put their house on the market (record number put their properties on the market in March) – this leads to slight over-supply so prices don’t rise so quickly. Removing the barrier to selling your house could dramatically increase the number of properties on the market – but if the effect is to create severe over-supply then there is the potential for it to stop house price rises when people find they have to drop their price to get a sale. No-one knows that this will happen but this is not a market that anyone should be taking risks with.
Unnecessary cost for the public
– The argument is that people are now paying out £300 that they weren’t having to spend this before.
– This argument doesn’t actually hold up too well – the HIP consists of the Energy performance certificate (or EPC), copies of the deeds, and searches. The EPC is an additional cost but it’s a requirement of european legislation – in order for the UK to reduce the emissions of it’s housing stock it has to measure them first – EPC’s is about measuring our emissions. The proposals to do away with HIPs specifically exclude EPCs – they are going to stay. The deeds – as a seller you’ve always had to pay for them, and as for the searches because you’re paying for them on the sale you don’t have to pay for them on the purchase. This especially favours first time buyers – who we need more of to give the market a shot in the arm.
HIP doesn’t do anything – no-one reads them
Yep, I’ll go along with that one. However if the documents are needed by your solicitor then it’s always helpful to have them up front – it cuts out time spent waiting for them
The Searches are out of date
The searches with the HIP only have a realistic shelf-life of around 6 months. In ‘normal’ property times if your house is put on the market at the correct sort of price you’d expect to sell within 6 months. In spite of the ups and downs of the property market over the last few years this still holds true. If they go beyond that and are out of date – this doesn’t cost the seller any more though, but the buyer will have to pay for a fresh set (which admittedly does add to the overall cost)
No-one acts on the EPC recommendations
Again I’ll agree on that one – and if you fall in love with a house you aren’t going to not buy it because it’s energy rating is an E instead of a D. However as the longer term aim of the EPC is to reduce our housing stock emissions it can’t be too long before we start to see green taxes based on this information. At that stage it will become a relevant factor and mean that people do start looking at the EPC (whether it will stop them buying the house is another matter)
PIQ is not a legal document – answer those and have to answer more when you sell it
Yes I’ll agree on this one – it’s an almighty pain that you have to fill out one questionnaire when you put the house on the market and then another one when you sell it. I would say this is more of an argument for sorting the damn thing out though rather than scrapping the whole thing.
Why Shouldn’t HIPs be scrapped?
All the interested parties agree on the basic principal of HIPs – get the information you need to buy a house out there up front as it saves time and gives transparency. They all disagree on how exactly that should be done. Given that the basic principal is agreed, wouldn’t it be better to nail the problems and turn them into something that helps them to achieve their potential rather than go back to a system that everyone used to moan about?
If enough heads were banged together we could get a system where you only fill out one questionnaire at the start of a transaction; when the survey on the property can be used by the buyers mortgage company as a valuation; where all the relevant information on the property is available straight away. The Torydems could have done this – they could have called it something else and claimed it as their own, and actually make an improvement to the house buying process.
Instead of this we seem to be getting a dogmatic MUST…..BAN….HIPs without logical reasons to back it up. HIPs are a crap system. However they are not as crap as what was there before (high praise indeed!), but it would make more sense to fix them than scrap them.
Thanks for reading