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Industry reels from fractured Hips

Attempts to put positive spin on last week’s U-turn have not impressed those firms which have spent 225m preparing for Hips, says Guy Anker

The Government’s decision to axe home condition reports as a compulsory part of home information packs has sent shockwaves through the industry.

A number of firms’ business models are thought to be under serious threat as an estimated 255m has already been spent in readiness for the launch of sellers’ packs next June. According to a senior industry source, 225m of that has come from firms looking to enter the market and the remainder from the estimated 4,400 people training to become home inspectors.

Almost immediately after the announcement, property website Rightmove saw its share price drop by a quarter prompted by nervous investors fearful of losses after the firm’s multi-million-pound investment in Hips.

Housing minister Yvette Cooper made the revelation last week and, despite Westminster’s arguably misguided efforts to insist that Hips are still alive and well, it is clear that the initiative is in tatters.

Hips have not been scrapped completely but HCRs were the most fundamental part of the packs, other than energy ratings, searches and title deeds. With the reports now becoming voluntary, it is highly questionable whether sellers will choose to pay for them although Whitehall has left the door open for HCRs to become mandatory again.

Not only has the Government implemented a U-turn on HCRs but its rhetoric has also changed. When the June 2007 implementation date was set last November, Cooper said the Government was introducing the packs because “too many sales fall through because of delays and late information, wasting money and causing great stress for buyers and sellers”. Now she says the most important element is the energy rating, adding: “People should be backing Hips to help everyone respond to the global challenge of climate change.”

The Association of Home Information Pack Providers director general Mike Ockenden manages to put a positive spin on the news, even if many of his members have been left reeling. He says: “The fact that Hips will still happen on June 1 is good news for the consumer. It is our firm belief that there will be consumer demand for the HCR and it will become mandatory.”

Yet Ahipps urges the Government to rethink its “woolly assertion” that it will promote the take-up of the HCR on a market-led basis. Ockenden asks: “Does this mean it expects the industry to carry on taking the risk in implementing Hips and HCRs at a time when the Government has knocked confidence?”

Others who have planned meticulously for the introduction of Hips are far from happy. Conveyancer Easier2Move sales and marketing director Karen Babington says: “This announcement is a shock as the Government has removed one of the fundamental features of Hips. These reports are intended to help consumers make better-informed purchase decisions.

“As this is one of the Governments stated objectives, this sudden U-turn seems to contradict the very purpose of these packs. We can only hope that the HCR trial goes well and they become mandatory inclusions in future.”

Estate agency Spicehaart chief executive Paul Smith says: “Making the HCR voluntary is a complete cop-out. It diminishes one of the main objectives that the Hip set out to achieve – reducing the number of failed transactions by improving the transparency. The Government has once again been completely ineffectual, bowing down to unsubstantiated and incorrect anti- Hip campaigns.”

The Tories have called for Hips to be scrapped altogether. Shadow housing minister Michael Gove says: “The Government’s ongoing plans for home information packs are now a complete shambles. The Government claims that the packs are necessary to implement an EU directive to provide energy condition reports when a home is sold, yet in Northern Ireland the directive is being implemented without the introduction of Hips.”

The Government based its decision to water down Hips partly on research by the Council of Mortgage Lenders which identified that some lenders might not be fully geared up to use HCRs until 2008-09.

CML head of policy Jackie Bennett says: “We are pleased that the Government has recognised the considerable risks of a big-bang approach to introducing Hips with full home condition reports. We have always said that the timetable was challenging for such a complex set of changes. Consumer demand and not the Government will now drive take-up of home condition reports.

“But there will be a mixed reaction from lenders and other stakeholders to the announcement. For those that have invested heavily to deliver and use home condition reports from next June, the lack of compulsion will be a disappointment.”

John Charcol senior technical director Ray Boulger says the move can be seen as positive because it gives more certainty to the June 2007 implementation date after fears that there were not enough home inspectors in place to produce HCRs.

This point is seen by many as the main reason why the Department for Communities and Local Government has made the reports voluntary, knowing that market forces will stifle demand so capacity is not stretched.

Another theory is that Chancellor Gordon Brown is less supportive of Hips, so the move is to fit in with his expected strategy once he takes over from Tony Blair as Prime Minister, as widely predicted.

Whatever the motives, it is clear that the whole Hip regime is in tatters and recriminations could yet come from those companies that have invested millions of pounds and the thousands of home inspectors training for what could be a worthless qualification.


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