06 Feb WHICH HOUSE PRICE SURVEY SHOULD YOU BELIEVE ?
With conflicting reports from the media, how can you really know what is occurring in the UK housing market ?
A house price index is a collection of key statistics that track the movement of house prices. The majority of the indices in the UK, are published at the end of each month, or shortly after. Virtually every other day, house price surveys make the headlines from various organisations, but they often appear to move in different directions. The bigger the change, the bigger the headline breaking news.
The reason for this variation in house price index, is that they all use different data and do different things with it, to produce their results. So, here is a guide to the house price indices from recognised organisations.
- The Land Registry Survey works by comparing completed house sale prices of the 15 million properties on its register, to the amount they were valued at in 1995, thus calculating the indexed difference in price. This means that this only measures the change in the price of properties that have been sold before, to ensure a proper comparison. This index includes cash purchases, as well as mortgage data, but excludes repossession and property transfers following a divorce. One drawback of this Index, is that its data can be 2 to 4 months old.
- The Government has its own monthly house price index, issued by The Department for Communities and Local Government (DCLG). Its data is supplied by the Council of Mortgage Lenders and covers a large sample of completed sales, with a mortgage, which means that cash purchases are not included. This index evaluates house price data from 2 months, previous and covers a broader analysis of the housing market, as there are 109 different lenders in the Council of Mortgage Lenders.
- The Nationwide and Halifax Price Index, two of the UK’s biggest mortgage lenders, produce their own survey each month, based on a sample of each lender’s mortgage approvals, but not completed sales. These statistics ignore cash purchases.
- The Rightmove Survey collects asking prices, from houses placed on its own website, over the previous month. It does not reflect the prices at which properties actually sell.
- The Royal Institution of Chartered Surveyors (RICS) House Survey offers something slightly different to other indices. The Housing Survey it publishes each month, highlights trends in the housing market, based upon the opinions of its members, not on actual property sales data. It is more of a snapshot of professional opinions about the housing market, rather than a statistical report. It is a rapid ‘front line’ information survey providing a more immediate indication of housing trends and professional opinion. The RICS Housing Market Survey, is the longest running monthly survey of house prices in the UK, having collected data since 1978. The Survey is cited by the Bank of England’s monetary policy committee, at its monthly interest rate setting meetings.
A housing index survey, regardless of its source, may be able to indicate what is happening to the value of property across the UK, but will not factor in local influences.