Home reports have devastated the Scottish house market

According to the Scottish Executive and Consumer groups, home reports were intended to revolutionise the Scottish house market for the better. Ignoring the results of its own failed trial, the Executive pushed ahead against reasoned opposition and sensible requests for delay, and made the commissioning of a home report compulsory on domestic property sales from 1 December 2008. The results have been spectacular.

• GSPC is the premier house selling organisation in the west. Their listings dropped by 80% in the month after the introduction of home reports. They have remained resolutely at about 50% of 2008 levels ever since.
• ESPC is the premier house selling organisation in the east. Their registrations dropped by 80% immediately after the introduction of home reports and are cumulatively down about 52% in 2009 compared with 2008.
• Solicitor property centres and estate agencies across the country have recorded similar figures.
• House sales recorded in the Land Register dropped dramatically in January 2009 by 64% from the 2008 figure.
• House sales recorded in the Land Register to end October 2009, the last date on which figures are available, are running at 5,503 per month compared with 8,571 per month in 2008. That is a massive fall of about 36%. And remember 2009 sales will have been artificially inflated from “normal” by purchases under the Lift scheme and by the stamp duty holiday.

On any logical view of the house market and these figures it is clear that home reports have had a significant deleterious effect. If the rules of a market change on a particular date and from that date activity levels collapse, I think it fair and reasonable to conclude that the rule change has affected activity. Our own experience in Caesar & Howie on volumes is typical and the chaos caused by this legislation is reflected in our daily work.
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• Our listings halved in number from precisely the date of the introduction of home reports and have not yet recovered.
• Multiple surveys had been unknown in our firm for years until the introduction of home reports. Now we are aware of them happening all the time – and who pays for them is often a cause of dispute.
• House purchase and sale transactions are taking longer and are usually more expensive for both buyer and seller.
• Many sales clients have complained bitterly to us about the cost of home reports, many buyers do not trust the seller's home report, and lenders frequently reject the home report and require their own survey to be done.
• Potential sales clients have simply said they would rather not sell than meet the cost of a home report in a slow market.
• Sellers and buyers alike treat energy performance certificates (part of the home report) with open contempt and see them as worthless.
• In many home reports, some, and even most, of the questions in the property questionnaire section are answered “don’t know”.
• Sellers in financial difficulty who cannot get credit are selling “off market”, often well under valuation, because they cannot afford the home report and they therefore cannot put their house on the market.

In the face of our experiences and the figures I have quoted, I am at a loss to see how any objective view of home reports could fail to confirm that they actually hinder the house market, not help it. We have had a recession since early 2008 and yet the largest falls in listings and sales have come since the introduction of home reports – most markedly so. Many commentators predicted that aspirational sellers (in our view the majority of sellers) would leave the market if it became too expensive to sell – and they have done just that, in their thousands.

Every aspirational seller is also an aspirational buyer – which is why chasing this group from the market by ratcheting up the price of entering the market was such a daft policy decision. Indeed I wrote to Alex Neil, the Housing and Communities Minister, and all MSPs advising that home reports would decimate the market and cause redundancies throughout the property and mortgage sector, as well as in areas where trade relies on house transactions, such as furniture shops, carpet shops etc. Such closures and redundancies throughout Scotland are now well documented.

As an aside, it seems pretty remarkable to me that a policy introduced to stop the non-existent problem of multiple surveys can actually cause multiple surveys and still be declared to be a success by our Housing and Communities Minister. If this mess is a success, what on earth would constitute failure?

Sadly, home reports were conceived in a Fantasy Land peopled by politicians, consumer “champions” and surveyors, with a sprinkling of a few non-representative lawyers. In Fantasy Land the 250,000 or so Scots who bought 155,241 houses in 2007 (and similar numbers in the years before that) were all hapless victims, recklessly spending their hard earned money on houses they knew absolutely nothing about. All these unfortunates apparently quite unwittingly bought “pigs in pokes” which might ruin their lives forever.

This upset the consumer organisations and politicians who always know much better than the actual buyers themselves how and in what way they should spend their money. Oh and of course, these silly buyers were racking up about five survey fees a purchase as well. Of course in Fantasy Land it was all just that – pure fantasy.

Without wishing to be offensive, I see from a recent press release that the proponents of home reports remain happily resident in Fantasy Land, congratulating themselves on how they have fixed the house market – which they surely have.

Home reports have “benefited buyers and sellers over the last 12 months” – the RICS.

“Which? is delighted the new system is working well” – Which?

“It’s good news for everyone” – Alex Neil, Housing and Communities Minister.

Well it must be great to live in Fantasy Land, where propaganda trumps facts. For the rest us left behind, we have to live with the gritty realities of life, one of them being the worst property market in living memory, a market brought to its knees by compulsory home reports.

There is an easy fix to this shambles. Just remove the compulsory nature of home reports. Get rid of the £500 civil fine for selling without one – so sellers can freely decide whether to commission a home report or not. Then we will soon see who is right in this debate – because members of the public will decide for themselves whether home reports are a good thing worth paying for or whether they are not.

Should anyone in Government, the RICS, Which?, or Consumer Focus Scotland read this article I hope someone will publish their response.

To save the hard pressed the bother of having to read it – I can tell you now what it will be.

“It wisnae us – it wis the recession”. How convenient. At all costs the home report project must be saved irrespective of fact, logic, job losses, or the economic damage it has done. Just wait and see.