A client told me recently he had read two conflicting surveys about house prices but didn’t know which to trust.
The government’s UK House Price Index from ONS and Land Registry reported property market activity in England and Wales was slowing whereas Rightmove said house prices were still going up.
The answer is they’re probably both right AND both wrong!
Reliable indicators?
There is a significant variation in the methodologies behind house price indices, not least because the figures are recorded at different stages in the home buying process.
Data from Land Registry, which has  provided the largest monthly sample of completed transactions since 1995 - currently around 100,000 - in England, Scotland and Wales and Northern Ireland  - has now joined forces with ONS to produce the seasonally-adjusted UK House Price Index (HPI). The measure is based on completion prices of all properties - with or without mortgages - as well as up to around 40% of “cash” purchases and newly built homes.  There could still be a delay of two to three months between compilation and publication of the report.
Perhaps of more concern is that the use of data from the Valuation Office to compile this index could be used to assess the council tax of every home in the country!
Although long established and fairly current, Rightmove’s asking prices for England and Wales are seasonally adjusted, offer a regional breakdown and a useful measure of average time to sell homes.  The data is based on their advertised properties which of course may not sell in that period.
Halifax vs Nationwide
Halifax, which is part of the Lloyds Banking Group and the largest mortgage lender in the UK covering around 20% of the market, has provided similar data on property prices as Nationwide since around the mid-1980’s  but publishes a few days later each month.
The Halifax survey is based on mortgage approvals not completed sales of its properties, which tend to be  situated more in the north of the country but  lacks a detailed regional breakdown and is said to be more active in the new homes sector.
Nationwide uses  an average value for UK properties at the time mortgages are approved in its survey - not when sales are completed. Figures take  account of property location and size, but are generated from the building society’s own mortgaged stock which is concentrated towards the south of the country and constitutes around 13% of the total.
Both reports are based on their own mortgage data when the price is agreed so reflect a smaller number of transactions, typically between 12,000 and 15,000 per month.
Other Contenders?
Of the alternatives, the Royal Institution of Chartered Surveyors (RICS) has proved to be a reliable identifier of supply/demand trends and turning points for the UK residential property market since 1978. Their monthly report was described by Goldman Sachs as “the best lead indicator of house prices in the country.” On the other hand,  RICS doesn’t include price data and numbers are taken from a relatively small sample.
The National Association of Estate Agents  (NAEA) tracks sales and provides supply/demand figures via UK estate agents but has concentrated more on first time buyer transactions recently.
The LSL Acadata Index (via agents Your Move and Reed Rains) uses transaction data from the Land Registry for England and Wales. The report covers all registered sales for these areas when contracts are exchanged and a completion takes place but is published three months after the price is agreed. Information from other independent sources is also used which equates to a total of around 80,000 transactions a month.
Hometrack has been producing a house price index  which compares  prices annually and  quarterly every month for over 20  years but more recently has covered  movements in major cities in England, Wales and Scotland only, rather than the whole country.
Making Housing Market Judgements
Different house price survey outcomes based on alternative ways of assessing available data mean the market may be regarded as much stronger or weaker than it really is which can compromise decision making.
In addition  to inconsistencies, compilation of the indices is generally a  mathematical exercise, whereas home buying tends to be more emotionally led. For instance, selling prices based on a rate per square foot or metre may reflect a south facing aspect, property condition,  larger gardens, the “premium” paid by some to live in a particular school catchment area or close to family and friends.
Establishing  a clear direction for the property market is virtually impossible as no two homes are the same and no one index gives a right or wrong answer. It is important to interpret each index depending on how it is calculated and try to take an overall view of market trends by considering indices together.
Market surveys can never be more than a guide to actual house price movements, so many commentators rely on an average of the main indices.
Probably the best way of finding out what’s really happening to property prices in your street is to speak to an independent chartered surveyor and ARLA-qualified estate agent like Jeremy Leaf who has been speaking authoritatively about the housing market to their customers and in the media for over 30 years.
Jeremy Leaf, a former RICS residential chairman & independent North London Estate Agency owner.

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