May 2008

HIPs — wrong place, wrong time...

WITH first day marketing rapidly approaching, we need firm and courageous leadership from the Government.

Home Information Packs are a mess: a commercial disaster for the industry and irrelevant to the consumer. First Day Marketing on June 1 is starting to look like a pipe-dream.

Given that we are now facing the worst trading conditions since the early 1970s and the prospect of a more general economic slump, urgent action is required.

We are calling for an industry task force to work with the Government and establish a proper basis for HIPs.

This will help avoid the kind of confusion which has arisen about precisely when a full HIP has to be ordered and make sure that there is a level playing field. No HIP ordered — no marketing of the property.

Currently too many agents are simply ignoring the legally binding requirement to ensure a HIP is in place and the biggest loser is the consumer.

Independent surveys from pollsters Mori and consumer watchdogs Which? recognise that HIPs have little value, don’t speed up the home moving process and are confusing for buyers and sellers alike — as well as for those who work in the industry. None of the key objectives for HIPs are being achieved.

In the early days, Which? adopted the same stance as ourselves at Spicerhaart — endorsing a Pack which contained a Home Condition Report. However, without the survey element, the Packs have no real value, not least because we have found that few buyers are interested in looking at the Energy Performance Certificate. The Government-funded Mori poll found that around four out of five people said the HIP had no effect on their decision to buy, and less than a third of sellers felt it made the process more efficient.

I strongly believe the Government now has to choose a new direction for HIPs. It could pull out altogether or revert to the old system with an EPC on the particulars, which buyers and sellers like; or we could go the whole hog and offer an exchange-ready HIP, complete with all relevant documentation, including a contract of exchange, survey and mortgage offer.

Even taking into account the time to prepare an exchange-ready option, it should still speed up the process in the long-run as it will only take a matter of days to complete, with fewer failed transactions along the way.

Instead, we have found to our cost there are severe operational problems across the industry in pulling together the information required in a HIP. Although things are beginning to improve, the supply of HIPs has been very erratic, meaning we have frequently had to wait many weeks to obtain the relevant details.

Meanwhile, we will continue to lobby the Government over these ridiculous rules which, undoubtedly, will be scrapped when the Conservatives take power at the next General Election.

It is now important that HIP providers and estate agents work together to make the best of what is a very bad situation.

Who will topple first?

THE signs are ominous. Storm clouds are gathering. Which of the big estate agencies will be the first to go under as market conditions tighten their grip?

Already, office closures and job losses are starting to spread within the industry, with companies citing poor consumer confidence and overstretched finances. Will a cut in interest rates make a difference or are home buyers running shy?

For many estate agents, the issue isn’t about sales or volumes. It boils down to their level of borrowing and whether or not they can service their loans. For those with private equity investors, going with cap in hand and asking for more money could prove a fruitless exercise, as those investors may also be having problems in borrowing more cash.

We are not forecasting a return to Dickensian times and being thrown into the poorhouse, but times will be tough on the streets and the begging bowls will be out.

Many of the bigger or high profile chains rely on private equity investment and it will be interesting to watch what happens over the next few months.

Mortgage access, especially for first time buyers, is the real problem. With the recent demise of 100 per cent lending, it is becoming more and more difficult for many first time buyers to purchase property. The much publicised credit crunch has forced lenders to reappraise their criteria and overall strategies for 2008, not only in the non-conforming market but in the sub-prime lending space as well.

Only six months ago, mortgages were available up to 125 per cent, buy to let up to 90 per cent and 95 per cent lending was available from nearly all banks and building societies. Customers who had credit problems in the past were also looked upon favourably.

All this has changed, which will have a detrimental effect on some areas of the housing market. A first time buyer now could struggle to obtain a 95 per cent mortgage and lenders are ever decreasing the loan-to-value ratio in this market.

The result is that branches are closing down quietly all over the country — and while newspaper advertising departments are noticing a significant tail-off in income, it seems their editorial departments are slow to make the connection with a news story on the doorsteps.

Redress: licensing the only realistic solution

THE new redress schemes being introduced for estate agents are simply a back door attempt by the Government to ensure our industry becomes properly regulated.

Under the Consumers, Estate Agents and Redress Act 2007, it will be mandatory for estate agents to belong to an authorised ombudsman scheme; the three applicants to run such a scheme are the Ombudsman for Estate Agents, the Surveyors Ombudsman (for RICS members) and the Register of Estate Agents.

However, according to the OEA, around 500 agents have chosen to join their HIPS-only scheme and have not chosen to pay up for full membership.

The danger with this is that some agents may do the bare minimum to comply with membership criteria and could ignore the broader principles designed to ensure an overall improvement in industry standards and accountability.

These changes really don’t go far enough and I continue to maintain that compulsory licensing is the only long-term solution.