A Guide To Understanding House Price Indices
One month prices fall, then the next, they soar. So which house price indices should you follow?
Are property prices going up or down? It depends on which house price index you go by – and all of them operate according to slightly different criteria so not all are equal. Due to the various statistics issued by different sources, it is easy to become confused by the large discrepancies. Each region is different and often a national index hides the real picture in each area. In addition to sold house price indices, some also cover asking prices and are published on other portals. To help provide some clarity, here is a round-up of some of Britain’s leading indices.
The Land Registry
The Land Registry – a non-ministerial department – has one of the most well-known house price indices in England and Wales. It is a repository of official statistics that uses sales data collected on all residential housing transactions, whether for cash or with a mortgage, stretching back to 1995. It tracks residential property price changes in England (nine regions) and Wales but omits newly built homes and those which have only been sold once or not at all. This shows an average overall increase of 6.7 per cent since November 2007 and compares prices not just on an annual but a monthly basis. So the average price of a semi-detached house in January 2015 was £124,180, as against £119,362 in March 2014.
The Land Registry also measures changes in prices of properties within a certain area: everywhere from Kensington & Chelsea (average £1,294,767) to Merthyr Tydfil (£64,952).
There are, of course, huge discrepancies in property values across the UK. The average London price quoted by the Land Registry is £458,283, while the average price for England and Wales combined is £179,492. The Land Registry also records the total number of residential sales: 79,549 from August to November 2014, as against 77,694 over the same period in 2013.
* For more information, visit www.gov.uk/government/organisations/land-registry
Office for National Statistics
At the ONS – the UK’s largest independent producer of official statistics and also a non-ministerial department – you will find a comprehensive rundown of house price increases using mortgage financed transactions data from the Council of Mortgage Lenders. Rises are expressed both nationally (9.9 per cent in 2013, 9.8 per cent in 2014) and regionally (10.2 per cent in England, 5.5 per cent in Scotland, 4.9 per cent in Northern Ireland, 4 per cent in Wales). Broken down still further into districts: 13.3 per cent increase in London, 11.5 per cent in South East England, 11.4 per cent in East of England. The Office for National Statistics (ONS) now has plans to beef up its House Price Index and make it the definitive UK index. This index, along with LSL Acad, have expressed the highest rises in value.
* For more information, visit www.ons.gov.uk/ons/key-figures/index.html
The Halifax has its own regularly updated house price statistics dating as far back as 1983. It uses its own mortgage completions data. It records that house prices in the three months up to February 2015 were 2.6 per cent higher than in the previous three-month period. Also, prices from December 2014 to February 2015 were 8.3 per cent higher than in the same period December 2013 to February 2014. But in February 2015, average house prices fell by 0.3 per cent compared to January 2015.
* For more information, visit www.lloydsbankinggroup.com
This HPI (House Price Index) claims to be more up-to-the-minute than the Land Registry figures. It uses their data but applies its own business model. The Financial Times helped to set this up. Like the Land Registry, latest house prices (averaged out over a three-month period) for England and Wales are £277,857 (monthly increase of 0.3 per cent, annual increase of 7.5 per cent), for Scotland £165,075 (0.3 per cent monthly increase, 4.2 per cent annual) and for Wales £163,510 (monthly increase 0.2 per cent, annual 3.9 per cent). The site also charts numbers of overall sales (11 per cent more in 2014 than in 2013).
* For more information, visit www.acadata.co.uk
Last year, a consultation was held by the ONS on the development of a definitive house price index to end the contradictory messages between statistics. If the new index is approved, the methodology will be published by early summer 2015.
If you are selling your property, it is a good idea to research sold prices in order to have a good idea of what your current property could be worth. Similarly, if you are looking to buy a property, it is worth checking out what has been paid for properties like the one you are searching for.”