House Price Index Part Two

by Mark Johnston

As discussed in part one house price surveys take data from different times in the house buying process and have different parameters, therefore house prices rise and fall often in the same month, but this depends on which property you read.

Many experts feel that the best index is the one that has the biggest sample size.

Selwyn Lim, managing director of house price website mouseprice, states “one house is very different to the next, so measuring change is very tricky”.

Data from these indices has shown that in a single month, the average UK house price stated in just 5 of the indices differed by around £67,460.

Therefore indices have been criticised in the past for at best confusing consumers and at worst misleading them.

A house price index is merely an indicator of wider market conditions and the information provided in them should therefore only form part of background research before approaching and estate agent.

Following on from part one of this article, there are other indices to also look at such as:

HALIFAX:

The Halifax is one of the largest UK lenders and has produced their index in the same way for almost 30 years.

This index shows the average price agreed on a property which is bought using a Halifax mortgage. It is a quarterly survey that shows regional data and covers the whole of theUK. The major problem with this index, according to some critics is that the Halifax has an historical northern bias and therefore its ‘typical’ house may not reflect the actual average house. It is also believed to cover just 10% of the mortgage market.

NATIONWIDE:

This index uses identical statistical methods to theHalifaxand again the figures are based on a sample of the lenders own loans each month, it does however cover the entire UK

Even though the Nationwide is theUK’s largest building societies and also one of the biggest mortgage lenders it too is believed to only cover 10% of the mortgage market. Therefore as cash buyers account for around 40% of the total transactions these figures could be then only based on as few as 3,800 mortgages. The prices measured are those agreed at the point when the mortgage is approved, not at the later point when the sale is actually completed.

RIGHTMOVE AND HOMETRACK:

Both of these property industry businesses produce their own house price surveys

These indices show the average asking price for properties put on to the market over the past month and it covers all of England and Wales. The figures are based on the asking prices of homes newly listed on the website, in a typical reporting period this is usually between 30,000 and 40,000 properties a week. However, rightmove themselves admit “it reflects asking prices when properties first come on to the market, rather than those recorded by lenders during the mortgage application or final sales prices”. Therefore the actual prices fetched could be widely different.

 



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