HIPs Confuse The Market

Home Information Packs (HIPs) may have given the property market an unexpected boost in September. Property website Rightmove reported that asking prices jumped up from an August dip to record a 2.7% rise to £241,642 in the weeks leading up to the introduction of HIPs for three-bedroom homes. This was the biggest gain for six months. Unfortunately although asking prices were up, the final selling prices may suffer from the glut of properties onto the market when demand is falling.

Rightmove reckoned that the introduction of home packs was distorting the market. Everyone is expecting a fall in house prices, but fluctuations in asking prices and selling prices have confused the market.

After the 1 August launch of HIPs for four bedroom properties there was a shortage of top-end property on the market, which pulled down asking prices for that month. Conversely, an increase in three bedroom homes on the market saw asking prices for those rise in September.

Asking prices are often seen as an indictor of confidence in the market; over the last quarter asking prices have gone up by just 0.5%, the lowest rise for a quarter since quarter four 2005. The rise for quarter two 2007 was 1.5%.

Miles Shipside, of Rightmove, said: “Legislative tinkering involving future cut-off dates has a history of unbalancing markets. In a stable market this presents fewer dangers, but in today’s more sensitive financial environment the effects can be more exaggerated. It is very unfortunate timing that HIPs and their side-effects are straddling a period of record house prices, the highest interest rates for six years and a tightening in mortgage lending criteria.”

House price figures released on Monday 15 October by the Department for Communities showed that annual house price inflation slipped back from 12.4% in July to 11.4% in August. The figures lag behind other studies by one month and showed that the average UK house price in August was £219,528. UK first-time buyers are paying on average £167,070, which is an 11.9% annual increase, and former homeowners are reported to be paying £245,263, an increase of 11.2%.