This week, the Land Registry released its new UK House Price Index. What does it mean? And how does it differ from all the others?
As regular readers of TheMoveChannel.com will know, there are a large number of reports that all purport to portray the correct current status of UK property values. However, with each index produced by different organisations and via different methods, it can be difficult to interpret or measure them, let alone tell which one is the most reliable.
Even the Land Registry and Office for National Statistics have not always agreed in the past.
There is a need for clarity, completeness and coherence in the official statistics published on this topic, acknowledges the Land Registry, with previous reviews of official statistics, such as the 2010 National Statistician’s Review of House Price Indices, recommending the production of a new, single report.
The Land Registry have therefore teamed up with the other official bodies – Registers of Scotland, Land & Property Services Northern Ireland and the Valuation Office Agency – to produce one HPI.
How does the official UK House Price Index work?
The UK HPI is calculated by the Office for National Statistics and Land & Property Services Northern Ireland. It applies a hedonic regression model that uses the various sources of data on property price, in particular Land Registry’s Price Paid Dataset, and attributes to produce estimates of the change in house prices each month.
The result is designed to reflect the final transaction price for sales of residential property in the UK. Using the geometric mean, it covers purchases at market value for owner-occupation and buy-to-let, excluding those purchases not at market value (such as re-mortgages), where the ‘price’ represents a valuation.
Information on residential property transactions for England and Wales, collected as part of the official registration process, is provided by Land Registry for properties that are sold for full market value.
The Land Registry dataset contains the sale price of the property, the date when the sale was completed, full address details, the type of property (i.e. detached, semi-detached, terraced or flat), if it is a newly built property or an established residential building and a variable to indicate if the property has been purchased as a financed transaction (i.e. using a mortgage) or as a non-financed transaction (cash purchase).
What do the other UK house price indices mean?
There are number of other house price reports that are published on a regular (usually monthly) basis. If they are not official, though, what do they mean? And how accurate are they?
Halifax / Nationwide
Halifax and Nationwide are the two biggest lenders providing regular house price reports for the UK. Unsurprisingly, they often disagree. Why? Because they are use their own mortgage approvals only to calculate their results. That means that they are not taking into account the whole of the market and also do not include any cash transactions. However, because they can use their own in-house data, they can produce the reports at a faster rate than the official UK HPI, which means that they provide more timelier snapshots of market trends.
The LSL Acadata (previously the LSL Property Services/Acadametrics) HPI reflects all transactions, as opposed to data samples, and provides mix and seasonally adjusted results at national, regional and county or unitary district or London borough levels.
Registers of Scotland
Registers of Scotland will continue to produce average house prices based on arithmetic means of these transactions, which is published as the quarterly housing market statistics in the second month after the month to which the figures refer to.
While the lender’s house price indices record the prices agreed at the point when a mortgage is approved, rather than when the property first hits the market or at the point of sale, Rightmove catalogues the asking prices listed by home sellers on the property portal.
10,000 estate agency branches list their properties on the site, from which Rightmove samples up to 200,000 houses to produce a monthly survey that combines the topicality of the lenders’ indices with the wider coverage of the UK HPI. (Rightmove’s listings represent around 90 per cent of all available residential properties in the UK.)Google+