The study by Oxford Economic Forecast (OEF) stated if housing transactions in the market were to fall by 10 per cent in the year after the mandatory launch of HIPs next June, there could be knock-on effects such as higher unemployment and lower gross domestic product (GDP) and tax takes by the government.
The effect was more profound if there was a 25 per cent drop in housing transactions, with the effects in both scenarios being felt until at least 2016.
Jeff Knight, director of marketing at GMAC-RFC, said: “We commissioned this work because, although there has been a lot of debate about HIPs, no modelling has been undertaken in the public domain to test the economic impact of them if there were to be a fall in housing transactions. This work fills that gap and frames the economic risks.”
The report by OEF found there would be a 0.2 per cent and 0.5 per cent drop in the baseline forecast of GDP in 2009 if there was a respective 10 per cent or 25 per cent reduction in housing transactions in the market.
The forecast also predicted a rise in unemployment, with 42,000 and 93,000 extra people out of work in the two scenarios, while the government’s tax take was reduced, despite the extra income it would gain from VAT on HIPs.
Rob Clifford, managing director of Mortgageforce, said this could be bad news for the industry. “There’s bound to be a discontinuity in the market as estate agents think 30 per cent of sales are made on a speculative basis. If this is the case, there will be a significant effect on transaction numbers for at least six months, which will be bad news for estate agents and will disrupt the feed of mortgages to brokers and lenders.”
