The deadline for mandatory HIPs distorted the market in December as people put their houses on the market in a rush to avoid having to pay for a Home Information Pack (HIP).
Further confusion for the housing market came in December as a glut of cheaper-than-average properties came onto the market to avoid the HIPs deadline of December 14, according to a new report by property website Rightmove. What with price falls, a seasonal slowing of the market and the first rate fall in years, the situation is now as unpredictable as it can be, the researchers said.
The report found average national prices falling 3.2% in December, a large drop exacerbated by the cheaper properties being sold in a rush: At this time last year 38% of properties coming onto the market had two or fewer bedrooms, it says. In the week from December 2 to December 8 this year this increased to 48%. This surge in the number of smaller properties coming to market will continue and be reflected in Rightmoves January House Price Index. The expectation is that the effects of the HIPs deadline will have calmed by February.
Looking ahead to the rest of next year, the survey expects the market to enter what it terms uncharted territory, and argues that it is up to the Bank of England to ensure that the base rate drops further: One way or another, we need a further 0.5% cut in the cost of credit to borrowers early in 2008 just to return market borrowing rates to where they were before the credit crisis. In addition, sellers need to price aggressively and banks need to get their own houses in order to improve liquidity as quickly as possible.
We are in a different world compared to previous housing downturns. It is a world of international banking interdependencies, and a world in which the robustness of the UK housing market has never been tested.