What effect has the introduction of home information packs (Hips) had on the housing market, and will their impact grow or diminish in the coming months? Few issues have caused as much wailing and gnashing of teeth as Hips. The Royal Institution of Chartered Surveyors (Rics) fought hard against them, seeking a judicial review ahead of their introduction because of a lack of proper consultation. Many of the surveyors contributing to the gloomiest Rics house-price survey since 1992, published last week, put some of the blame on Hips. The National Association of Estate Agents remains opposed, even though Hips have been required since December 14 for the sale of all properties.

The Commons select committee for communities and local government, in its recent withering verdict on the introduction of Hips, described it as “another failure of delivery” from the government due to “poor preparation” and “a retreat” by the relevant ministerial team. It thinks Yvette Cooper, the housing minister, should have ignored the critics and included the all-important home-condition reports in the packs, as well as sticking to the original plan to introduce them for all properties last June. Had she done so, Hips would have been in place ahead of the credit crisis-induced downturn in the market.

For economists, Hips are, in theory, hard to argue against. Markets are less efficient when buyers and sellers are not in possession of the same information. This “information asymmetry” is more likely to work against sellers rather than buyers. A classic piece of economic research by George Akerlof, based on used cars, found that in the absence of trustworthy information, buyers will assume a product is a “lemon” and mark down its price accordingly. Sellers of good-quality items suffer most.

The practical problem with Hips is that, in excluding home-condition reports, they leave out the most vital information of all. The other potential benefit – economies of scale, because buyers will no longer have to pay for their own surveys – is lost.

How much, despite the criticism, have Hips helped the housing market in recent months by limiting the number of properties that have come on sale? Their introduction is a plausible explanation for at least part of the lack of supply, though it probably pales into insignificance compared witha reluctance by sellers to put their properties on the marketat a time when prices have been soft. It may be that those who rushed to do so ahead of the deadlines for Hip introduction have seen their houses adding to the stock of unsold properties on agents’ books, or have had to accept price cuts. In time, Hips’ effect on supply should be minimal, though they may limit “price testing” by people who have no serious intention of selling.

It is likely that the introduction of Hips has affected the various house-price measures in recent months. This is explicit in the case of the property website Rightmove’s house-price index, though there has probably also been some effect on the others. That will fade. Whether we will ever come to love Hips is another matter.

home.economics@sunday-times.co.uk

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