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  A client told me recently he 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 way house prices are assessed, not least because the figures are recorded at different stages in the home buying process.
Land Registry, which has supplied the largest monthly sample of completed transactions in England, Scotland, Wales and Northern Ireland since 1995 has joined forces with ONS to produce the seasonally-adjusted UK House Price Index (HPI). The measure is based on completed sales of all properties - with or without mortgages – including up to around 40% of “cash” purchases and newly built homes.  Unfortunately, there is still a delay of two to three months between compilation and publication of the report. 
On the other hand, the report by Rightmove for England and Wales is fairly current, long-established, seasonally adjusted, offers a regional breakdown and a useful measure of average time to sell. However, the figures are based on asking prices of their advertised properties which of course may not sell in that period.

What about other contenders?

Nationwide and Halifax have been providing data on house prices since the mid-1980s which is based on mortgage approvals not actual sales and obviously excludes around 30% or more ‘cash’ purchases.

Nationwide uses an average value for UK properties at the time mortgages are approved - not when sales are completed. Figures take  account of property location and size, 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.
Halifax, which is part of the Lloyds Banking Group and the largest mortgage lender in the UK, covers around 20% of the market but publishes a few days later each month. 
Their survey is also 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.

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 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.

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.

The LSL Acadata Index (via agents Your Move and Reed Rains) bases its results on transactions from the Land Registry for England and Wales. The report covers registered sales when contracts are exchanged and a completion takes place but is published three months later Information from other independent sources is also used which equates to a total of around 80,000 transactions a month.

Investment consultancy, London Central Portfolio (LCP), has launched a new monthly index based on the sale of every property sold in England and Wales including those sold for cash and new builds. LCP claims to use “the most comprehensive data available” which has been developed (with Acadata) over 20 years to assess prices of properties in three areas – the UK as a whole, Greater London and Prime Central London and is said to be two months more up to date than the Land Registry’s  index.
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 numbers 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, NAEA 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.

Spring 2018