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Will home information packs have a negative effect on the buy-to-let market?

HIPs will have little effect on the buy-to-let sector as landlords tend to regard it as a long-term investment, say our experts

Louise Cuming is head of mortgages at Moneysupermarket.com
Awareness of Home Information Packs is worryingly low, with 61% of consumers under the impression that buyers will have to stump up the cost for the packs.

This misapprehension could have detrimental implications for the buy-to-let market, especially if potential investors think the expense of a HIP is yet another barrier to becoming a landlord.

Of course, it is the person marketing the property who will be responsible for ensuring that the pack is available for all open market sales of homes with vacant possession and this will affect the vast majority of buy-to-let transactions.

The legislation will not apply to private sales such as to a member of the family, a neighbour or a friend, where the property is not offered on the open market, or to sales of tenanted property where the home is not offered with vacant possession. Neither will it apply to non-residential property, mixed commercial (or industrial) and residential property or portfolios of properties.

Where they are provided, HIPs will make the market more efficient for buy-to-let investors. Buyers will have information such as any problems with the property, copies of relevant approvals, copies of warranties and guarantees if the property is newly built and guarantees for work that has been carried out on the property. They will also receive Home Condition Reports based on professional structural surveys. Requirements such as these should cut the costs to potential landlords attributable to transaction failures caused by survey or valuation inspection findings.

But the HIP debate looks set to rumble on and further fuel will be added to the fire now Gordon Brown has been called upon to push for implementation to be delayed or cancelled.

But the advent of HIPs is inevitable and as an industry we must ensure we can give our clients the advice they need.

Dev Malle is sales director at Pink Home Loans
I’m pretty sure the impact of Home Information Packs will be greater in the residential market than in the buy-to-let sector. One reason I think this is that when landlords go into the buy-to-let market these days, they tend to be looking to stay in it for the long term. They regard buy-to-let as an investment, often to generate additional income (sometimes as a self-employed landlord) or to support their retirement plans.

Come the time of the implementation of HIPs, while we may see a small proportion of landlords offload properties, they would have probably done this regardless as the appreciation of property will be higher than the 1,000 they will have to spend on the HIP. For them, the long-term gains should outweigh any short-term losses incurred because of HIPs.

There are a few circumstances in which HIPs won’t need to be produced. For example, my understanding is that landlords who have sitting tenants won’t be required to produce packs. But the reality is that many lenders have criteria issues when it comes to lending on properties with sitting tenants, so these will be few and far between. Most buy-to-let sales will be captured by the legislation.

Bearing in mind that one of the sectors that looks set make the biggest gains as a result of the introduction of HIPs is estate agents, there will be little incentive for them to encourage buy-to-let investors to sell their properties early. They would miss out on the extra revenue they can gain from the packs.

While I don’t believe the implementation of HIPs will have an impact on the buy-to-let market specifically, the residential market could experience a mini-rush of sales along the lines of the rush to buy when double MIRAS was removed in the late 1980s.

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