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Know your indices

Today Nationwide revealed that house prices increased by 1.2 per cent in May, but upcoming house price indices may tell a different story.

Nationwide says house prices are up as does, but Halifax, the Land Registry, Hometrack, Department of Communities and Local Government and the Acadametrics/Financial Times all report house price decreases – which one should you take notice of and which ones are just statistical bluff?

It’s an important issue, because your client will probably take notice of all of them. Every house price index commands a decent amount of column inches every month, depending on the results. A big leap in any direction, or a continual trend will claim the biggest headlines and they matter. As John Charcol senior technical manager Ray Boulger says: “The confidence factor is so crucial in the housing market”.

But they all measure different things; Nationwide and Halifax base their information from their own approvals, the DCLG’s information is put together from select Council of Mortgage Lenders data, uses asking prices from its registered estate agents, the Land Registry uses English and Welsh property transactions over a three-month period and Hometrack surveys estate agents in England and Wales across every postcode. Then the FT index takes an average of all of them.

All these are, of course, perfectly acceptable ways of collecting and measuring housing data. But they all give wildly differing results: says house prices are up 2.4 per cent at the moment, but the FT says house prices are down 1.1 per cent. That’s a 3.5 per cent difference – which, in real terms is thousands of pounds.

So you can imagine how confused homeowners are right now – are they up or are they down? Well, it depends obviously on a million different things in reality, but the confused masses only want to hear one thing – that things are back to normal and they can go forward and borrow, happy in the knowledge that their home is making them money.

Nationwide and Halifax are instant reactions to that month’s mortgage lending but are biased to their brands, while the Land Registry lags behind with three-month old data.

Hometrack and use asking prices, which as we all know can change considerably before the deal is finalised (as well as missing Scotland and Northern Ireland completely). DCLG takes snapshots of lenders, which could create a skew and the FT is an average of averages, which could miss detail. And all of them will tell you that their method is best.

Unfortunately, all and none of these can answer the fears of the borrowing nation. These indexes give snapshots, they offer anecdotal evidence but none offer a complete picture of how much a UK home is worth.

So which one do you think is best measurement of the way things are? Is there a best house price measurement? Or are the headlines just chasing statistical follies every month?

Let us know by clicking on the comments box below.


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There is one comment at the moment, we would love to hear your opinion too.

  1. Know your indices
    ” happy in the knowledge that their home is making them money”.In my opinion this is totally the wrong attitude to HOME purchase, and it is partly to blame for the present malaise.
    We go to work to make money, we speculate on the stock market to try to make money, we invest in various ways to try to make money, we should not buy our HOME to try to make money.
    Of course we do not wish to see our HOME decrease in value but neither should we see it as an investment vehicle.
    Your point regarding indices is well taken though, lies, damned lies and stastics!

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