What’s stabilising, slowing, falling, rising at a slow pace, enjoying a surprise increase and skyrocketing, all simultaneously?
The answer? UK house prices.
If it appears as though you encounter a different – and conflicting – headline each week about house prices, that’s since these stories derive from an entire suite of monthly indices operated by everyone in the Land Registry, to mortgage brokers and property portals.
Here, we explore the varied and complicated realm of house price indices, and offer expert consultancy on whether sellers should certainly sweat within the figures they see in the newspaper.
House price indices: the basics
There are many house price indices out there, but the most of media attention focuses on five of the biggest players – Land Registry, Nationwide, Halifax, LSL/Acadata and Rightmove, all of which publish their data once a month.
And this regularity is really the one thing these five indices have in common, because they use different datasets, methodologies and sample sizes to create their calculations.
We’ll explain much more about the specifics later, but the table below provides an at-a-glance look at how the biggest indices work.
|Index||Data source||What is the data based on?||Sample size (approx)||Coverage||Most recent findings (date)|
|UK House Price Index (Land Registry)||Land Registry, Registers of Scotland, Land & Property Services Northern Ireland||Confirmed house sales||100,000||UK||Prices fell by 0.8% in January, increased by 1.7% year-on-year. (20 March)|
|Nationwide||Nationwide’s mortgage approvals||Mortgage approvals||12,000||UK||Prices increased by 0.2% in March, 0.7% year-on-year. (29 March)|
|Halifax||Halifax’s mortgage approvals||Mortgage approvals||15,000||UK||Prices fell by 1.6% in March, increased by 3.2% year-on-year. (5 April)|
|LSL Acadata||Land Registry price paid data||Confirmed house sales||100,000||England & Wales||Prices increased by 0.5% in February, fell by 0.5% year-on-year. (19 March)|
|Rightmove||Rightmove listings||Property listings||100,000||England & Wales||Asking prices increased by 0.4% in March, fell by 0.8% year-on-year.|
Editor’s note: This short article was updated on 10 April to explain the UK House Price Index is a member of the Land Registry, not work for National Statistics.
The three kinds of house price index
So what if you are searching when ever you encounter each of these indices? Let’s bring the experts in…
The UK House Price Index (released by the Land Registry) offers the most comprehensive data on prices, but it comes with a significant lag.
We spoke to Neal Hudson, the founder of Residential Analysts, concerning the pros and cons from the index.
Neil says: ‘This index is the best one for being aware of what has became of prices in your area. Unfortunately, the way it’s constructed means it may only really inform us what happened some time ago – not what is happening now.’
One of the main together with your index is that you can search by local authority, which allows for a more forensic examination than other indices. Beware, though, of authorities with few transactions – as data for these can be volatile.
The LSL/Acadata index also uses Land Registry data, but analyses it inside a slightly different way.
LSL/Acadata claims that only 38% of sales are reported in a timely fashion towards the Land Registry, leading to ‘untimely’ findings. LSL states have solved this problem by creating a custom-built ‘index of indices’.
The government’s advice on the LSL Index says that, simply put, it expands on Land Registry figures using a forecasting model to estimate prices for that latest month.
Mortgage approval indices
Two from the ‘big five’ indices – Nationwide and Halifax – use their very own mortgage approvals because the grounds for their data, meaning they may not show the entire picture.
Oliver Knight, a residential research associate at Knight Frank, told Which? ‘among the limitations of those mortgage-based indices is that they don’t include cash sales, which will make up around 30% of transactions in the UK’.
There will also be differing methodologies to deal with. The Halifax index utilizes a weighting system according to 1983, while Nationwide updates its weighting every 2 yrs.
This might have to go far to explaining why their findings are extremely different.
Property listing indices
Thankfully, it’s easier to describe the Rightmove Index, which is based solely on properties listed on its portal.
This means it uses prices set by sellers as well as their estate agents, instead of ‘sold’ prices or mortgage approvals (Nationwide and Halifax).
Of course, this process isn’t fool-proof either, as prices tell us what a seller wants, certainly not what they’ll get.
‘The advantage of the Rightmove index is that it’s very up-to-date’ says Oliver. ‘As it’s according to prices, it's really a a bit more volatile, and average price figures are usually higher than in indices according to completed transactions.’
Selling your house: what do house price indices tell you?
If you’re thinking of selling your home, it’s important to not get too really stressed out by house price indices.
Yes, it’s a time period of economic uncertainty also it remains seen what's going to happen with Brexit, but at this time there aren't any signs the floor is falling out from the property market.
In search from the average house
They’re the very best indicator that we have, however that indices can only tell you so much – primarily because there’s no such thing being an average house. Think of it this way – if there are two houses on the street and one rises by 5% and also the other one falls by 5%, does this mean that prices haven’t changed at all?
As Neal puts it: ‘Indices only tell us about average prices in an area. The cost your home will cost depends on its characteristics and a willing and financially able buyer being ready to pay a price you’ll accept.
‘Even within local areas there might be a large distribution of costs and price changes’.
Oliver echoes these thoughts. He states: ‘Indices are a good method of understanding underlying trends, plus they is a good idea to gauge the healthiness of a market when viewed alongside other indicators.
‘Markets have become increasingly localised, so headline indices might not give a true representation of what’s happening inside your specific area. If you’re considering selling a house, it’s useful to also take suggestions about pricing from a local estate agent.’
Advice on your mortgage options
If you’re looking to sell your home, you may be worried about early repayment charges in your mortgage, or perhaps be wondering if you can go with you.