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Clash of the crystal balls

What price property market surveys? Homeowners and buyers are baffled by the clashing lender surveys which not only fail to agree on what will happen to house prices but can&#39t even come to a consensus on what has already happened.

There are a multitude of surveys produced by lenders with forecasts for this year which range from a gentle descent to a crash landing. Despite often incorporating each others&#39 results and statistics, they fail to reach agreement.

The Office of the Deputy Prime Minister is scheduled to produce a monthly house price survey in the latter part of this year. Although this has been touted as the first truly independent survey of the market, it will be produced using statistics from the likes of the Halifax and Nationwide.

The Halifax survey claims to be the biggest, using the widest sample of properties with over 20,000 monthly. But it has admitted it produced the wrong results for all 12 months of 2002. Its end-of-year results have been rejigged to show a rise of only 1 per cent in December rather than 2.1 per cent.

The mistake happened because the Halifax overestimated the number of houses with garages and left out homes worth more than £1m.

Charcol technical manager Ray Boulger doubts that the Government survey will provide any greater accuracy than the others. He says: “We have no greater reason to trust the accuracy of the Deputy Prime Minister&#39s Office survey above any of the others.”

Boulger cites the muddle over pension contributions as a proportion of GDP as a classic example of inaccuracy that does not inspire confidence. The big mistake came when new money was treated as transfers, leaving it looking like a £46bn contribution had been made while the real fig-ure was only £32bn.

The Government department concerned has since been dubbed the National Office of Guesswork. This error has left many doubting if the Government can get its sums right on the housing market.

Boulger believes part of the problem with price surveys is they are not comparing like with like because their methodologies are different.

The Halifax claims to survey the biggest number of properties while Nationwide bases its results on the amount of new business, worked out on its results on lending data for properties at the post-survey approval date. Nationwide says it does not use the simple average price of a house – which is the method used by the Land Registry – because it claims this method is too easily influenced by a change in the mix such as the proportion of different properties, types and locations.

Bradford & Bingley has decided to change the way that it produces its results and these will now appear on a three-monthly basis to make comparisons between a similar per-iod the previous year. It believes this will even out the sharp contrast that can appear from month to month.

Rightmove, one of the newer players in the survey market, bases its survey on asking prices, which Boulger thinks is “a dangerous thing” because these can change radically before a deal is completed. Not only does he doubt the sample size used but he also thinks that the use of hot and cold spots is misleading as there is a big difference between regional prices. Some areas have seen 40 per cent gains while prices in some regions have dipped significantly, particu-larly in central London on properties over £1m.

But one thing is certain – the gap between house prices in the South-east and the rest of the country has started to close. The latest figures from all the surveys show that the biggest rises were in the Midlands and the North.

The surveys first started appearing in 1983 when the property industry was booming but some have had their doubts about them from the beginning.

Prudential premier mortgage services managing director John Malone says he thinks that a more accurate way of producing the information would be to consult with chartered surveyors and use estate agency statistics to get more up-to-date results.

Malone says: “The lenders&#39 statistics are often based on sales that were completed three to four months earlier so by the time results are out the market has changed again.”

Hometrack&#39s figures are based on estate agents&#39 sales, which, while being more up to date, are liable to variation over individual properties. These variations make it difficult to interpret results because it is difficult to make comparisons between selling one property one month and another the next in different regions.

Last year, everyone got their predictions wrong – only 5 per cent growth for 2002 was all that was expected at the more conservative end.

The strength of the market took everyone by surprise. But in light of this, one of the more notable changes that IFAs have noticed is the speed with which lenders are now monitoring changes and amending their predictions.

Mortgage brokers had a golden 2002 so how are they facing up to less promising prospects? Mortgage Force managing director Rob Clifford says: “We still think that property is an excellent investment whether the market dips a little this year or not.”

He thinks most of his customers are not following surveys closely and adds: “Looking at the surveys, it is all about accuracy – the more sophisticated the client, the more likely they are to want more information.”

But he says he has been particularly surprised by the number of customers using property price predictor tools available on the internet to do research on their properties.

One sector that Clifford thinks has profited from an increase in surveys and analyses of the market is the buy-to-let market where clients can be buying in unfamiliar areas.

Like the majority of brokers and lenders, Clifford thinks the market is certainly in for a cooling-off period but is not predicting a dramatic slowdown until the end of the year and then only at the top end of the market.


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