Every month a number of organisations publish house price indices, each based on a different set of data. Sometimes the findings agree, sometimes they conflict.
Whether you are buying or selling a
property, working in the property industry, or just interested in the ups and downs of the
housing market, it helps to know exactly who is producing each index, what data they use, and what the headline figures actually reflect.
Who compiles it?
Halifax, now part of Lloyds Banking Group, and one of the UK's biggest mortgage lenders.
What does it show?
The average price agreed on a property being bought using a Halifax mortgage, and the percentage change in the price over the month and year. A quarterly survey shows regional data.
What area does it cover?
The whole of the UK.
What time period does it cover?
A full calendar month: the 1st until the last day of the month.
What is it based on?
Mortgages approved by Halifax.
How long has it been going?
Halifax started publishing data in January 1983, but the index in its current form began in April 1984.
Is it
Yes.
What else is done to the raw data?
Halifax "standardises" the figures so that instead of comparing the prices of one set of houses one month with another set of houses the next, it tracks the price of a "typical house". It creates this by giving values to certain attributes of the properties being bought – including the number of rooms, how much central heating it has and whether there is a garden – and using these to calculate the price. This is called the "hedonic method". For its annual price change it uses an average of the last three months' prices and compares this with the average for the same period of the previous year.
Full details are here (A4 document).
Why should I trust it?
Halifax is one of the UK's largest lenders and has been running the survey in the same way for almost 30 years.
Why should I be sceptical?
Although Halifax attempts to iron out anomalies, critics say its data can be skewed in months when there are low numbers of transactions, and that the bank's historical northern bias means its typical house may not reflect the average UK house.
Who compiles it?
Hometrack is a property analytics business which supplies information to mortgage lenders and other sections of the property industry.
What does it show?
What estate agents and surveyors think is happening to the housing market in their local area, including average house prices and the proportion of the asking price buyers are paying.
What area does it cover?
England and Wales.
What time period does it cover?
A calendar month up to and including the 21st of each month.
What is it based on?
A monthly, 11-question survey which is responded to by at least two agents or surveyors in every postcode district in England and Wales – on average between 5,000 and 6,000 questionnaires are returned each month. The average price data is based on the contributor's opinion on the achievable selling price for each of four standard property types in every postcode district – detached houses, flats/maisonettes, semi-detached and terraced houses. The price is for a given date each month, assuming a willing seller and a reasonable marketing period while taking into account current market conditions and recent transactions.
How long has it been going?
The index began in 2000, but started covering the whole of England and Wales in February 2001.
Is it seasonally adjusted?
No.
What else is done to the raw data?
The collected house price data goes through a verification process and is then weighted up from postcode district level using housing stock numbers to come up with an "overall weighted average price".
Why should I trust it?
There is no time lag – it reflects what is happening now – and it covers the whole of England and Wales, not just areas where transactions are taking place.
Why should I be sceptical?
Because it is based on sentiment – what agents think certain properties might fetch – rather than actual prices.
Who compiles it?
The Land Registry is the government department responsible for registering and recording details of land and property ownership in England and Wales. It employs Calnea Analytics to actually compile the data.
What does it show?
The average asking price of properties bought in the past month – these are the prices on completion and include cash purchases as well as those funded with a mortgage. It also reports annual and monthly price changes.
What area does it cover?
England and Wales.
What time period does it cover?
Calendar month.
What is it based on?
The prices paid in residential sales in England and Wales completed during the month and reported to the Land Registry – about 35% are usually reported by the month end.
How long has it been going?
Since 2005, although data going back to January 1995 has been added.
Is it seasonally adjusted?
Yes.
What else is done to the raw data?
Any property that hasn't been sold at least twice since 1995 is removed from the sample – Land Registry says it has slightly more than 6m identifiable matched pairs of sales – and the index is based on the repeat sales regression method. The average price as at April 2000 is taken as the baseline price, and growth measured in each period is applied to it to produce the current average price.
Why should I trust it?
Land Registry says its index is "the most accurate independent house price index available. Using our data set of completed sales, it is the only index based on repeat sales." It is the only one based on all sales, mortgaged and otherwise, and on the final price achieved for the property.
Why should I be sceptical?
Like some of the others it is seasonally adjusted. It doesn't reflect the prices paid for new-build properties or those that have remained in the same hands for a long period, which means fewer than the 35% of sales reported are actually used. The index is revised each month because of the time lag between completions and registrations, which means it is eventually very robust, but also means you are dealing with a figure which will change slightly.
LSL Property Services/Acadametrics
Who compiles it?
Acadametrics, a consultancy which specialises in the assessment of risk in property and mortgage portfolios, for LSL, a property company which owns estate agency firms and surveyors.
What does it show?
The average price of a property bought and registered with the Land Registry over the past month. It shows monthly and annual changes and the number of sales.
What area does it cover?
England and Wales. A separate index for Scotland is based on the Registers of Scotland.
What time period does it cover?
Calendar month.
What is it based on?
The
Land Registry's house price data.
How long has it been going?
Since September 2003 (originally it was the FT House price index), but data going back to 1995 has been added and it has been back-cast to 1989.
Is it seasonally adjusted?
Yes.
What else is done to the raw data?
Land Registry gathers all of its data for sales reported during a month, including sales completed in previous months, and calculates average prices. These are given to Acadametrics, which mix adjusts them to provide an average price which isn't skewed by changes in the types of properties sold month-on-month. Because only around a third of sales completed in a month are reported by the end of the month, an "index of indices" model is used to calculate what the figure will be when all sales are in.
Why should I trust it?
It is based on a big data set and refers to completed sales financed with mortgages and cash, including new-build properties as well as older homes. The "index of indices" calculation allows it to be more up to date than the Land Registry.
Why should I be sceptical?
Once all sales are in it is subject to change, and each month figures from previous months are updated.
Who compiles it?
Nationwide, the UK's largest building society and one of the biggest mortgage lenders.
What does it show?
The average price agreed on a property bought using a Nationwide mortgage, and the percentage change in the price over the month and year. A quarterly survey shows regional data.
What area does it cover?
The whole of the UK.
What time period does it cover?
Ostensibly a calendar month, but it is always published before the end of the month and Nationwide will not say which date it runs to, claiming the information is commercially sensitive.
What is it based on?
Mortgages that are at the approvals stage with Nationwide, which is after the valuation has been done. Nationwide says its share of the gross house purchase market has been about 10% in recent years.
How long has it been going?
The society has quarterly figures dating back to 1952 and monthly figures dating back to 1991, although it changed its methodology in 1993.
Is it seasonally adjusted?
Yes.
What else is done to the raw data?
Several types of property are removed, including buy-to-let and right-to-buy properties, plus very small or very large homes (there are specified limits for each type of property). The society then "mix-adjusts" the prices to come up with the price of a "typical house". The system looks at factors such as location and number of bedrooms, and relates them to the price for which the house was sold. From this the model can estimate how much on average a house would cost given a set of values for these characteristics.
Why should I trust it?
Nationwide says its index can cope with low numbers of transactions: "Although it remains similar to the Halifax method we substantially updated our system in 1993 following the publication of the 1991 census data. These improvements mean that our system is more robust to lower sample sizes because it better identifies and tracks our representative house price."
Why should I be sceptical?
Although the typical home is used, as with Halifax critics say its data can be skewed in months when there are low numbers of transactions and by the society's southern bias.
Office for National Statistics
Who compiles it?
Previously the communities and local government department, now the Office for National Statistics – the government's official data collectors.
What does it show?
The average price on completion for a property in the UK, and annual and monthly changes. Data is broken down by region, type of property and type of buyer.
What area does it cover?
The whole of the UK.
What time period does it cover?
A full calendar month, but there is a lag – March's figures are published in May.
What is it based on?
Data from a sample of completed property sales provided by mortgage lenders, representing about 65%-70% of homes bought with mortgages. During 2007, when there were on average about 85,000 loans a month for house purchase in the UK, approximately 50,000 records a month were supplied by about 60 lenders. In the six months to June 2011 there were an average of 37,000 loans a month for house purchase, and 26 lenders supplied information on about 21,600 sales.
How long has it been going?
Since February 2002.
Is it seasonally adjusted?
The index includes both seasonally adjusted figures and untouched figures at the national level.
What else is done to the raw data?
It is "mix-adjusted" so it isn't skewed if a lot of flats in the south-east are sold one month, then a lot of four-bed homes in Scotland the next. Different characteristics of each property are given values/weights, and these feed into a model of an average home. The values are based on the transactions carried out during the previous three years. For example, the 2012 weights are based on transaction numbers from 2009-2010.
Why should I trust it?
Because it is based on data from a large number of mortgage lenders and because, unlike most of the others, it isn't seasonally adjusted. The ONS says it is "one of the main house price indices used by central and local government to support decision making in the UK".
Why should I be sceptical?
When the DCLG still managed the index it said it was
"influenced by house price growth rates in the higher priced areas (which are currently in the south) where house prices – and therefore total expenditure on house buying – is highest. Similarly, regional rates of change in house prices determined by the DCLG Index are more influenced by the market for the higher priced properties (ie, the demand for detached houses)."
Who compiles it?
Rightmove, a website which advertises properties being sold by 90% of UK estate agents.
What does it show?
The average asking price for properties put on the market over the past month, and the percentage change in that price over the month and over the year.
What area does it cover?
England and Wales.
What time period does it cover?
The month up to the second Sunday of every month – this may be four or five weeks depending on how the calendar falls. March's figures will be measured on the second Sunday in March.
What is it based on?
The asking prices of homes newly listed on the website – in a typical reporting period Rightmove says that will usually be 30,000-40,000 properties a week, or around 120,000 in total.
How long has it been going?
Records began in August 2001; reporting began in August 2002.
Is it seasonally adjusted?
No.
What else is done to the raw data?
Properties with asking prices that are three standard deviations above or below the mean within each region are removed from the calculations. This can be several thousand homes. The data is mix-adjusted so it isn't skewed if, for example, in one month many more flats are sold compared to houses. That value is then used in the calculation of the average national price.
Why should I trust it?
Rightmove says of its survey: "It is produced from factual data of actual prices of properties currently on the market." The sample includes "circa 90% of the market – the largest and most up-to-date monthly sample of any house price indicator in the UK".
Why should I be sceptical?
As Rightmove admits: "It reflects asking prices when properties first come on to the market, rather than those recorded by lenders during the mortgage application process or final sales prices reported to the Land Registry." The actual prices fetched for the properties could be wildly different.
Royal Institution of Chartered Surveyors
Who compiles it?
Rics, the trade body for surveyors.
What does it show?
How surveyors think the property market is behaving in their area.
What time period does it cover?
A calendar month. Surveys are sent in the second week of the month and received by the end of the month.
What is it based on?
Responses to a monthly survey of 450-500 surveyors (usually 250-300 reply).
They are asked 10 questions covering changes in prices, sales and interest over the previous three months and what they expect to happen over the next year. They are also asked for firm figures on how many homes have been sold and how many are for sale.
What area does it cover?
England and Wales. Information is collected across 10 geographical regions.
How long has it been going?
Since January 1978.
Is it seasonally adjusted?
Yes.
What else is done to the raw data?
It is regionally weighted using long-term averages based on Land Registry figures. If an area represents 10% of sales, responses from that area will be weighted to represent 10% of Ric's overall figure. Numbers are crunched to produce a net balance, so instead of telling us how many surveyors think prices will go up and how many think they will go down, the index subtracts the proportion forecasting a fall from the proportion forecasting a rise – so if 10% think prices will rise but 20% think they will fall, it says -10% think there will be a fall. This does not mean a 10% fall is being predicted.
Why should I trust it?
Figures showing how many properties are on sale and how many would-be buyers are signing up can give you a good idea of what is happening in the housing market.
Why should I be sceptical?
Because the rest of it is based on sentiment.
Source: Guardian
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