House prices measured: what the different indices show
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Version 0 of 1. A new house price index is published on Tuesday, bringing together the reports published by the Land Registry and the Office for National Statistics (ONS). The Land Registry previously put together an index based on the prices of properties that had previously been sold, which meant no new-build costs were captured, while the ONS included only mortgaged sales, so cash purchases were not reflected. The new index, the Official house price index, will replace these and aims to offer a more accurate picture of prices across the UK. The new index is the only one published by government agencies, but there are several other snapshots of the market published each month. Each is put together in a different way and, as a result, has a different outcome. We look at what each one shows. Official house price index This index will be produced monthly by the ONS and published by the Land Registry. Each month there will be five reports: a monthly UK summary, and separate monthly reports for England, Wales, Scotland and Northern Ireland. There will also be some new statistics, including data on first-time buyer and cash buyer prices. The index will be based on data from a range of sources – the Land Registry and Registers of Scotland will provide price-paid data, while the Council of Mortgage Lenders will provide information about the different types of buyer. The Valuation Office Agency will provide information about property attributes – the size and number of rooms, for example. The figures will be mix-adjusted to allow for the fact that different houses are sold in different monthly periods. The price data will be calculated using a geometric average in line with the previous Land Registry index – geometric averages give similar results to a median, whereas arithmetic averages (as were used in the ONS index) are what you would usually refer to as a mean. Arithmetic averages tend to lead to a higher average price due to the larger impact of higher value properties on the mean. Halifax Compiled by Halifax, now part of Lloyds Banking Group and one of the UK’s biggest mortgage lenders, this reports on the whole of the UK. The monthly report shows 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. Halifax “standardises” the figures from its mortgage approvals data 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”. The figures are also seasonally adjusted. Halifax started publishing data in January 1983, but the index in its current form began in April 1984. Current UK average house price: £213,472 Nationwide Another mortgage lender’s index, this time from the UK’s largest building society. It shows the average UK house price using data from mortgages it has approved during the month. 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). Nationwide then “mix-adjusts” the prices to come up with the price of a “typical house”. The society has quarterly figures dating back to 1952 and monthly figures dating back to 1991, although it changed its methodology in 1993. Current UK average house price: £204,368 Rightmove Rightmove is a website which advertises properties being sold by 90% of UK estate agents, and its index shows the average asking price of those newly listed in England and Wales during the month, and the percentage change in that price over the month and over the year. Recently, Rightmove also introduced average prices for first-time buyers, “second steppers” and those at the “top of the ladder”. The index is based on up to 200,000 listings, with a few thousand homes removed each month to get rid of anomalies. It only reflects new asking prices – not if a property that was listed in a previous month is reduced or raised in price. The figures are not seasonally adjusted. Rightmove began keeping records in August 2001 and reporting on them in August 2002. Current England & Wales average house price: £308,151 Royal Institution of Chartered Surveyors Rics, the trade body for surveyors, reports each month on how its members think the property market is behaving in their area. The report is based on a monthly survey of 450-500 UK surveyors who 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. The data is seasonally adjusted and 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 the overall Rics 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. The index has been running since January 1978. Current forecast: 10% more Rics members said they expected house prices to fall than to rise over the next three months LSL Property Services/Acadametrics Acadametrics, a consultancy which specialises in the assessment of risk in property and mortgage portfolios, compiles the index for LSL, a property company which owns estate agency firms and surveyors. It covers England and Wales and shows 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. Land Registry gathers all of its data for sales reported during a month, including sales completed in previous months, and calculates average prices. These prices are mix adjusted to provide an average price which isn’t skewed by changes in the types of properties sold month-on-month. The data includes cash sales as well as those financed with mortgages. It has been published since September 2003 (originally it was the FT house price index), but data going back to 1995 has been added. Current England & Wales average house price: £293,599 |