House prices: behind the headlines

http://www.theguardian.com/money/2015/jul/06/house-prices-headlines-long-term-trends

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Every month several house price indices are published. While it can seem like they are saying different things, comparing what three of the main reports have said over the past eight years shows some clear trends.

Following a period of rapid price growth during 2013 and the first half of 2014, house prices appeared to have stabilised. However, that upwards trend returned this year, according to mortgage lender indices. It remains to be seen whether this will continue in the second half of the year, or if it is just the re-emergence of seasonal volatility. The Land Registry index has yet to record the most recent rises as it lags the other indices due to being based on sale completions rather than mortgage approvals.

The many regularly published house price indices are useful for providing an overview of national trends. But they report a single average house price (some based on the mean, others on the median price), and with around 1.2m housing market transactions every year, an average hides massive variations.

For that reason, it’s worth looking at the Land Registry index which measures price growth at a county/unitary authority level.

The chart above uses that data. It shows that house price growth has been highest in London over the past five years (all the red dots are towards the right-hand side of the chart). In recent years you would have found all the London markets (red dots) towards the top of the chart as well, reflecting the highest one-year change in house prices.

However, over the past year house price growth in some parts of London have slowed as concerns over taxation and limits on higher loan-to income multiples have reduced demand. Some areas of London now have lower annual growth than markets in the rest of England, and so sit lower on the chart.

Meanwhile, there are markets, particularly in the north of England, that continue to see house price falls.