UK Housing Market to be Hit by the Big HIPs Freeze During December
Housing-Market / UK Housing Nov 23, 2007 - 12:16 AMBy: Nadeem_Walayat
The British Government's decision to expand the requirement for ALL UK Home Sellers to provide a Home Information Pack as of 14th December 07, will likely result in a big freeze on transactions hitting the UK housing market from 14th December 07. As fewer properties are put onto the market and thereby less transactions take place. Whilst this could be construed as being short-term supportive of house prices, it will hit the housing sector hard, which includes mortgage lenders and estate agents that could see as much as a 25% drop in business over a short space of time, and therefore the expectations are for further shocks in the housing and financial sector, this time focused on estate agencies.
The HIPS had been originally planned to come in force during June 2007, but have been delayed and staggered in the rollout due to industry concerns and lack of qualified energy assessors.
However after the initial slump in transactions, this extra cost of approx £500, associated with selling properties will lead to a further deflationary effect on the UK housing market as Home Buyers will still have to conduct their own surveys before mortgages would be approved. Especially as HIPs do not contain a compulsory home condition report.
First Time Buyers are expected to be hit the hardest from the HIPS freeze as the £500 cost is a greater percentage of a typical first time home buyer priced house in the region of £100,000 to £150,000, and therefore the supply of these properties are expected to be reduced the most. This will ripple out and be felt all along the housing chain and thus contributing to a Big FREEZE in the UK Housing Market which will contribute to a further loss of confidence.
The Home Information Packs (HIPs) were ironically introduced to increase the speed transactions in the Housing market as each potential buyer would no longer need to conduct expensive repetitive searches on the same property before discovering potential problems that could lead to the sale falling through.
The HIPs packs include the following compulsory documents:
- Home Information Pack Index
- Energy Performance Certificate
- Sale statement
- Standard searches
- Evidence of title
- Additional information for leasehold and common hold sales, where appropriate.
Additional optional documents may be included such as flood risk search and home condition survey report. HIps sample
The current consensus forecast is now for a stagnating UK housing market during 2008. The expectation is that as house price declines occur, this consensus will eventually change to recognise a declining housing market in line with the Market Oracle forecast of at targeted 7% drop during 2008 and a 15% drop over 2 years.
The next date for Home Owners / Sellers and Buyers to watch is 1st of April 08, when the capital gains tax change could result in an avalanche of buy to let selling. This tax change is such a bad move for the UK housing market that I would not be surprised if the Chancellor did a u-turn during the March 08 budget. However, despite a possible u-turn, the buy to let sector is primed for a crash as the buy to let lenders evaporate from the market place in the face of the credit crunch squeeze on intra-bank lending, which is playing itself out with the likes of Northern Rock and Paragon this week, with many other lenders and players in the coming months to come forth for their own mini-share price crashes and bringing many to and over the edge of liquidation. Two key banks at risk are Alliance & Leicester and Bradford & Bingley, with a plethora of other non bank buy to let and subprime lenders about to burst onto the news scene over the coming months.
UK Housing Market Forecast for 2008-09 - As of 22nd August 2007 |
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UK House Prices to fall by 15% over two years, falling prices to be accompanied by cuts in UK interest rates. (22nd Aug 07), |
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By Nadeem Walayat
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Nadeem Walayat has over 20 years experience of analysing and trading the financial markets and is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 100 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
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