Will There Be a Rise or Fall in the Price of HIPs?
When Home Information Packs were initially implemented they were more comprehensive. Until an industry campaign led to their abandonment, statutory Home Condition Reports designed to detail the general condition of properties in jargon-free terms were supposed to be included in the packs.
With HCRs included, the Department for Communities and Local Government estimated that HIPs would cost around £600 to over £1,000 each. The DCLG estimated that the HCR alone would cost between £250 and £1,000 per pack. With HCRs removed from the equation, the government revised its position downwards to £300 to £600 per HIP for most properties in England and Wales.
The reality has been quite different. In the year since HIPs were finally rolled out to one and two-bedroom properties, prices have come down to below £200 in some instances, although deals in the range of £250 to £350 plus VAT are more uncommon. Some estate agents are charging £400 per pack but considering that the HIPs produced belong to them and not to clients, such pricing looks uncompetitive.
The Price Of HIPsThe price trend in the HIP market has followed a downward path since the packs were introduced. A number of HIP providers are competing in a falling property market, which combined with the poor publicity the packs have suffered means that competition is cutthroat and so are prices. Publics can only wait and see what happens next.
Competition has led to firms exploiting technology to keep prices low. Internet-based HIP providers charging under £200 per pack by keeping overheads to a minimum are holding up well in the downturn.
Nevertheless, the crucial point is that the credit crunch has badly damaged the property sector and prices are falling across the board. HIPs, born into a credit crunch world, are operating in a contracting market.
Triggered by the collapse of the US sub-prime crisis, the economic crisis began in the mortgage market and spread throughout the global economy. When it began, banks became frightened of their exposure to bad loans through interbank lending, freezing the market. Securitisation, which had become the primary way mortgages were funded, stopped. Specialist lending collapsed and house prices began to fall. The property bubble had burst.
Transaction numbers in the mortgage market have gone into freefall and are showing no signs of recovery. They are running at about a third of their pre-credit crunch levels and house prices have fallen by 20%. Fewer transactions mean fewer HIPs. A contracting property market means prices will fall further as HIP firms compete for a bigger slice of a diminishing pie.
This sounds like bad news for pack providers but the sector has proven to be resilient to the credit crunch’s slings and arrows. Mike Ockendon, director-general of the Association of Home Information Pack Providers, claims that just four have closed their doors this year.
After all, HIPs are compulsory so deals made will involve them. Competitive prices represent good news for consumers, who need all the help they can get in today’s economic climate.