John Charcol senior technical manager Ray Boulger has branded seasonally adjusted house price indices such as those from Halifax and Nationwide as “a farce”, saying real price movements are being skewed.
Last week, Halifax published its latest house price index, which shows that house prices fell 4.2 per cent year on year in May.
Nationwide’s house price index shows that house prices fell by 1.2 per cent year on year in May.
Boulger says that by looking at the non-seasonally adjusted figures over the first five months of 2011, the Halifax index records a rise of 0.5 per cent in house prices while over the same period Nationwide’s index shows a rise of 3.1 per cent.
Boulger says: “The way that providers of house price indices seasonally adjust their figures is a farce. Over many months, the seasonal adjustment skews the real figures so much that the result is the comment generated is often misleading.
“If index providers cannot even agree on the direction of any seasonal adjustment, let alone broadly the scale of it, that in itself is a pretty damning indictment of the whole shoddy seasonal adjustment concept, at least as far as house prices are concerned.”
He adds that providers of house price indices should give as much prominence to the real figures as they do to the seasonally adjusted figures.
Halifax and Nationwide say that without seasonally adjusting house prices, they cannot accurately gauge underlying market trends and month-to-month changes would be meaningless.
Chartwell Funding managing director Robert Winfield says: “No house price index is reflective of the whole market. I would do away with them altogether because they do not influence consumer behaviour.”