The 7 House Price Indices To Be Reviewed

Hot off the press is the news that The UK Statistics Authority has launched a review into the contradictory figures publicised by the various monthly UK house price indices.

If you use information from the various indices you can take part in a questionnaire throughout August at housingstatisticsnetwork.co.uk. The review will report back by the end of the year.

Lisa Davies, spokesperson for the Office of National Statistics, says: “The review aims to examine the existing products in order to make recommendations over how to improve accessibility and usage.”

Below is a blog I wrote a while ago which shows why the indices can’t be trusted and how they are collected.

Land Registry

The Land Registry records all completed property sales in England & Wales and is published on a monthly and quarterly report. Land Registry is using a system called ‘Repeat Sales Regression’ to measure the change in prices over time. This means it is comparing the price of properties sold now with the price paid when it was sold before.

The proceeds of all the transactions are totted up, and then divided by the total number of sales to reach an average sale price. Repossessions and property transfers following a divorce are excluded to avoid skewing the sample.The Land Registry’s figures can provide a unique insight into not only national but local prices.

In fact, the Registry can provide an accurate picture of prices down to postcode level.However, the figures are out of date by the time they are published.

Government Price Survey

The government has its own monthly house price index, issued by the Department for Communities and Local Government (DCLG). It uses lending information from about fifty lenders, which is collected through the Survey of Mortgage Lenders. It does now contain information on cash purchases, which account for about a quarter of the market, and, it will only appear two months in arrears.

The survey offers indexes for the whole UK, the major regions and one for first-time buyers. The new survey depends much more on the total amount of money spent. This means that London and the South East, where house prices are highest, will have a greater influence on the government’s index.

Nationwide & Halifax

These are the surveys all media love to quote. Both surveys cover the entire UK, rather than just England and Wales. Their figures are often very similar, as they are both based on the price agreed after a survey by their mortgage customers. However, like the new government survey, they ignore sales which are transacted on a cash basis. So, again a quarter of all transactions are missing.Find the Nationwide index and Halifax here.

Royal Institution of Chartered Surveyors (RICS)

This survey reflects confidence in the property market rather than what is actually happening to house prices. Three hundred surveyors and estate agents in England & Wales are asked if they feel prices are falling or rising. Respondents are also quizzed on a host of other related issues, such as whether the number of buyers and sellers are rising or falling. Generally speaking, the RICS survey is the first to show any sea change in the market.But! It’s opinion only from those on the ground-not fact. There are 80,000 surveyors in England alone-so this is a VERY small sample.

Hometrack & Rightmove

Both of these property websites also produce their own house price surveys. Hometrack was first in on the act in 1999, and has established its survey as a very useful guide to current prices. Data is collected from 3,500 estate agent offices from all 2,200 postcode districts in England and Wales. The estate agents report whether asking prices are rising or falling.

Rightmove’s survey operates in a completely different way to Hometrack survey, collating asking prices for houses placed on its own website over the previous month. The sample size is quite extensive and is “Based on circa 90% of newly marketed property.” Over half the UK’s largest estate agency chains choose to list their properties on its site. Now RightMove also list Land Reg data too.

Conclusion

Interesting isn’t it? Viewing statistics in full context rather than what the media or govt want us to believe. There should always be a note of caution-remember Some of the stats above don’t include cash sale purchases-so a quarter of all sales are missing from all the stats. Many of these sales will be from distressed sellers, auctions & repossessions.

The overwhelming data sources are from mortgage lenders. So the view will always be somewhat skewed, and can be open to manipulation simply because they instruct the valuer. Don’t get caught up in the hype of press reports and govt propaganda. House pries are only relevant for and in your area.

You may like our other blog: House Prices Infographic-The Real Story

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