Can HIPs survive the acid test?
By Damian Clarkson     12th September 2007

The extension of HIPs to the sale of three-bedroom homes will decide whether the much maligned packs sink or swim…

In case you missed it, HIPs were finally brought to market on the 1st of August after a decade of blunders and delays, but were limited to the sale of four bedroom homes. A month on from their launch, and the few HIPs proponents that do exist - namely the government and those who actually sell the packs – have already deemed them a success and claim they have proved their doubters wrong.

But they may be getting ahead of themselves, as rolling out HIPs to four bedroom homes was little more than a glorified trial run. Not only is the number of such homes relatively small (18% of the total), but August is also one of the quietest times in the property market –especially for larger homes, with most families away enjoying their summer holidays.

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The jury is still out on HIPs
So the fact that HIPs haven't brought the industry to a standstill as critics claimed isn't necessarily a sign the packs were successful, just that they're not yet prevalent.

In fact, just 7,000 packs have been delivered in the six weeks since its launch, according to the Association of Home Information Pack Providers (AHIPP). Considering more than 3,000 energy assessors have now been hired, that means they have only had to complete one energy performance certificate (EPC) – the key part of the HIP – every two and a half weeks.

Hardly a tough challenge, then.

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Now the real test begins
But extending HIPs to three-bedroom homes changes all that. Now, 60% of England's homes will require a pack before selling, and with autumn one of the busiest times in the housing market, demand for HIPs is likely to soar.

That means everyone involved in the process, from the energy assessors to the local councils providing the property searches, will have to significantly up their game. The next few weeks will determine whether HIPs will speed up the buying process, or achieve the exact opposite.

Once thing is for certain, given the sheer scale of the second phase of HIPs' roll out, failure will have massive consequences for every part of the property industry.

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The early signs are not promising
Let's put aside the packs' dismal track record over the last decade and focus solely on their progress since last month's launch.

According to the Royal Institute of Chartered Surveyors, the number of four bedroom houses brought to market in August was less than half compared to the same period last year.

The National Association of Estate Agents (NAEA) paints a similarly bleak picture in its latest survey of members. It found that 63% of agents had reported decreases in the number of larger properties on their books over and above the seasonal norm, reporting drops of 37% on average. Most damning of all, staying out of the market to avoid HIPs was cited as the main reason for the decrease.

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Have HIPs cut the supply of property in the market?
And NAEA chief executive Peter Bolton King claims it's going to be more of the same with three-bedroom homes. "Our concerns have always been that the introduction of HIPs would lead to a lack of supply following implementation.

This does indeed seem to be the case with four bedroom homes and is now likely to be replicated in the three-bedroom homes market.

Another, unnamed, NAEA member was more blunt in their criticism, claiming: "The pack was brought in to reduce abortive costs and achieve a faster exchange of contracts – both of the government's aims have failed miserably.”

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Staring down the barrel
And so that's where we stand. D-Day for HIPs and the early signs aren't good. The criticism from estate agents in particular is significant. Put simply, they want to make money by selling lots of homes.

Their opposition to HIPs is based purely on the fact that the packs might reduce the number of homes being sold, or slow the sales process down. They believe it will achieve the exact opposite of what the government introduced them for.

And if agents, the key players in the buying and selling of homes, don't back them, what chance do HIPs have in succeeding?

As I said in the beginning, some proponents say the packs have defied their critics. More likely it will be them wearing egg on their face come the end of phase two.

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Article produced by EveryInvestor.co.uk