Why House Price Indices Are A Continual Mind Boggle

house prices indices

Halifax have recently released their quarterly house price index, and as with all historical house price indices, it has left both buyers, sellers and voyeurs, none the wiser.

This isn’t discounting the Halifax index methodology, after all the Halifax house price index is the UK’s longest running of them all with data for the whole country going back to the early 80’s. No, it’s more that the result, which show that house prices in the three months prior to June were +2.6% higher than in the same period last year, contradicts that of say Rightmove, who report that prices have fallen in June for the first time since 2009.

The discrepancies go on and on depending on which lenders figures you read.

Nationwide reported a gaining of momentum in June with prices rising +1.1% month on month, breaking the downward spiral of the previous three months. Though in May, they gave us the dreary headline that house prices were experiencing ‘the longest sustained decline since the financial crisis.’

So why are we often left baffled by a plethora of conflicting house price indices on top of dazzlingly dramatic headlines?

The answer is because every financial institution’s index is based on entirely different methodology. With different methods for collecting data, we are always going to be left with inconsistent trends, so it’s definitely worth understanding the methodology for each power house.

House price indices - year on year change graph

 House Price Indices - Average house price graph

 Halifax House Price Index 

Halifax look at like-for-like properties when analysing property price movements with seasonal adjustments thrown in. They use their own ‘agreed mortgage advance’ data, which is bunched into three month periods so as to provide a better picture of underlying trends.

Halifax  – June 2017 results

  • +2.6% year on year
  • -0.1% period on period
  • Average house price £218,390

Nationwide House Price Index

Similar to Halifax, Nationwide use their own mortgage lending data to reach their results and they too adjust for seasonal and geographical considerations. They say they are ‘more robust’ than Halifax. Unlike Halifax, they produce single monthly figures.

Nationwide – June 2017 results

  • +3.1% year on year
  • +1.1% month on month
  • Average house price £211,301

Rightmove House Price Index

Rightmove look at asking prices when analysing their house price index, which can produce extremely volatile figures.

Rightmove – June 2017 results (asking prices)

  • +1.8% year on year
  • -0.4% month on month
  • Average house price £316,109

Land Registry and The Office For National Statistics

The Land Registry in conjunction with the ONS, collect official data on sales, recording virtually every sold property in England and Wales. They give a clear indication of the average house price by country and region. Since the data is official though, it often takes a while for the data to be recorded, meaning that this House Price Index is usually a little out of date, more often than not, by two months.

Land Registry and ONS – April 2017 results

  • +5.6% year on year
  • +1.6% month on month
  • Average house price £220,094

When buying or selling a property, it is important to take these variations in methodology into account, while at the same time taking the figures as broadly representative rather than fully. For the most accurate index, The Land Registry prevails, though as we know, in the current climate, things can change drastically overnight, so the two month lag in data may not show a true picture. The mind still boggles, but at least we now understand why.

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