Research to Inform the Five Year Review of the Home Report

1 Introduction

1.1 The Home Report was introduced on 1 December 2008, and Scottish Ministers committed to a review after five years of operation. The review commenced on 5 December 2013 and comprised a public consultation and a research study. The consultation ran from 5 December 2013 until 6 March 2014, with the findings published on 7 May 2014.

1.2 This report presents the findings from the research study conducted to inform the five year review of the Home Report in Scotland, commissioned by the Scottish Government. This research comprised analysis of secondary data sources; a survey of buyers and sellers; a survey of prospective buyers and sellers; and qualitative research with housing industry professionals, national stakeholders, and buyers and sellers.

Background

Policy background

1.3 The Home Report was first recommended through the work of the Housing Improvement Task Force as a means of improving the condition of private sector housing in Scotland^[1].

1.4 Since 1 December 2008, a Home Report has been required for almost all residential property coming onto the market in Scotland^[2]. Provision was made for the Home Report through the Housing (Scotland) Act 2006, with the detailed requirements set out in secondary legislation. There have been no changes to this legislation since it was introduced.

1.5 Each Home Report consists of three elements:

• Single Survey - conducted by a Chartered Surveyor, this includes a house condition report, a valuation and conveyance issues report^[3] and an accessibility report.^[4]
• Energy Report - also provided by a Chartered Surveyor, this details and grades the energy efficiency of the home and sets out potential improvements and headline costs. From 4^th January 2009, all properties that are sold or rented must also have an Energy Performance Certificate (EPC)^[5].
• Property Questionnaire - completed by the seller (or a person authorised by the seller to complete on their behalf), this provides information about the property such as Council Tax banding and previous alterations to the property.

Home Report objectives

1.6 The Home Report was introduced with a number of specific objectives, namely:

• to improve information about property conditions, therefore providing an incentive for repair or maintenance works to be carried out in advance of sale, or identifying areas where improvements could be made after purchase
• to address the problem of multiple valuations and surveys, particularly in market 'hotspots', either where multiple surveys were done on a single property or where buyers conducted surveys on multiple properties (see Glossary for definition).
• to address the problems created by the practice of setting artificially low asking prices, potentially distorting the market in some locations.

Interim Review

1.7 The Interim Review of the Home Report^[6], which reported in 2010, made a number of conclusions after the first year of operation. The key conclusions were that:

• the Home Report was being used to inform/confirm decisions on repair requirements, with likely positive impacts on stock conditions
• there had been a sharp decline in multiple surveys as a result of the Home Report, reducing transactions costs
• the Home Report had discouraged the setting of artificially low prices, and
• the system for producing and distributing the Home Report was working well.

1.8 However, a number of concerns were raised in the Interim Review, chiefly that:

• some sellers had not completed the property questionnaires
• the energy report was not seen as particularly useful
• some sellers were getting several valuations from different surveyors and then commissioning their Home Report from the one that provided the highest value also known as 'beauty parades', and
• some agents were restricting access to the Home Report.

Research objectives

1.9 This research examines how the Home Report has performed over the past five years. It has five key objectives, namely to:

1. explore the awareness, knowledge and understanding of the Home Report - and specifically the three documents that make up the Home Report - among buyers, sellers and industry professionals.
2. examine how the Home Report works in practice and how it affects the house buying and selling process.
3. examine whether the Home Report is meeting its original objectives and consider whether these objectives are still appropriate.
4. assess whether the Home Report structure works across the housing cycle as a whole by investigating the benefits and costs it has in different market conditions.
5. identify any wider impacts of the Home Report on the housing market.