Do HIPs herald opportunities for the off plan market?
The great HIP debate is raging all around us, but until now, off plan property has been somewhat overlooked. This is set to change following this month’s announcement that new rules apply from April 2008. So if you’re not sure where you sit on the HIP question - read on.
The misconceptions surrounding the relevance of HIPs for off plan and new build properties have been festering for months. Until now, many new build properties have remained exempt from HIPs under regulation 17C; although new builds commissioned before this came into play already require a HIP. The main reason behind the time lag is the fact that it was not possible to produce Energy Performance Certificates (EPCs) for off plan properties, as the assessment involves a physical inspection. This changes in April when software becomes available for assessors to conduct Predicted Energy Certificates (PECs) instead. Then all marketed properties – including those purchased off plan - will need HIPs.
Interestingly, the HIP will be the responsibility of the marketer of the property whether the developer or an agent. And don’t be caught out by the fact that although a full HIP is not required for properties sold between developers, those being sold on for residential purposes will need one, whether the buyer intends to live in it or not.
Good news for off plan
The effect of HIPs on the property market has been much discussed since their phased launch began. Reports show a huge decrease in three bedroom houses put on the market since the HIP arrived – some claiming up to 73%. The media suggests that vendors are being put off by HIPs, firstly because they cost valuable pennies and secondly due to worries over underlying problems the HIP might uncover - a concern which is largely irrelevant for brand new builds.
According to RICS, 20% of properties put on the market annually are simply curious homeowners with no intention of selling anyway. So with fewer vendors testing the water – and muddying the market - there is less competition for buyers, which bodes well for an increase in off plan profile and sales.
The explosive media attention on HIPs over the last few months has hinted at universal disaster for anyone in the property market. We think differently. HIPs are a great marketing tool for new builds: their superior energy efficiency versus older properties becomes far more obvious for example. HIPs could just provide off plan properties with an additional boost, by highlighting the benefits of new and off plan for the many buyers still moving up the property ladder.
