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Hippy hippy shake-up

Canny FTBs could find some bargains ahead of the introduction of Hips

With only 18 months to go before home information packs are introduced on June 1, 2007, the Council of Mortgage Lenders is calling on the Government to get a move on and publish a timetable for implementation.

The introduction of Hips could have a number of effects. Homeowners with dodgy properties are likely to want to get rid of their flat or house before the requirement to produce a Hip becomes mandatory and the leaking pipes, rotting floorboards and rising damp are revealed in the home condition report.

This could mean a flood of run-down properties coming on to the market in early 2007. Buy-to-let investors with cash to finance repairs might be able to find some bargains.

Some 75 per cent of homebuyers do not have a full structural survey carried out before they purchase and the home condition report will give most potential buyers more information than they have currently. This is good for buyers but not so good for sellers of dodgy properties.

Others may decide to put their property on the market before June 2007 to avoid the cost of paying for a Hip although it seems likely that competition among estate agents may lead to the cost of the Hip being included in the agent’s sales commission.

It therefore seems likely that there could be an increase in the supply of properties coming on to the market in the first half of 2007, which could affect prices. This could be good news for first-time buyers.

After the introduction of Hips, the cost of providing a pack – estimated at between 600 and 1,000 – is clearly going to deter speculative homeowners from putting their property on the market to see what it might fetch. This could lead to a shortage of properties after June 2007 and a rise in house prices.

The CML sees first-time buyers waiting until after the introduction of Hips so that they can benefit from the information in the pack and lower costs that might ensue.

But the canny first-time buyer is going to be out and about in the first half of 2007, looking to take advantage of any price falls due to the sudden increase in the number of properties on the market. Provided they have a proper survey carried out – which can be used to negotiate the price down still further if it uncovers faults – they may well be in a good position to snap up a bargain.

The CML is concerned that homebuyers will believe that the home condition report supplants the lender’s valuation and feel more than a little miffed when they discover that it does not.

Equally important, if the home condition report is to replace the lender’s valuation in the long run, something must be done to ensure it can be accessed electronically from a single database. The Land Registry would be the ideal institution to offer this service but no work has been done on this. Nor has the Government indicated that it might be prepared to cover or subsidise what would be considerable up-front costs.

Having commercial firms setting up multiple databases of home condition reports could undermine one of the main aims of Hips by allowing homeowners with run-down properties to arbitrage between suppliers of home condition reports until they get one they like. It does not take much imagination to see that some suppliers might get a reputation for having soft inspectors who will not be so rigorous when it comes to checking out the fraying electrical wiring. It would also mean extra expense for lenders which would have to search possibly dozens of databases rather than one central one.

With the Office of the Deputy Prime Minister staying silent on these issues, it is no wonder the CML says: “We are disappointed that as yet the Government has done little to simulate the potential impact of Hips and we urge it to do so urgently. For consumers to realise the full benefits of home condition reports within the mortgage process, lenders need to be able to have full electronic access to the home condition report databank and time to build and test their interaction with it. The ODPM should have published a detailed implementation timetable by now. Without this, it is difficult to have confidence in the process at all.” Money Marketing50 Poland Street, London W1F 7AX

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