House price indices to be investigated by Statistics Authority
The UK Statistics Authority has launched a review into the differing figures produced by the various monthly house price indices in the UK.
The indices, which are provided by lenders such as Halifax and Nationwide as well as estate agents and the government, regularly produce conflicting results, offering a confusing picture of the UK property market.
Lisa Davies, spokesperson for the Office of National Statistics, says: "The review aims to examine the existing products in order to make recommendations over how to improve accessibility and usage."
There are two indices provided by the government from the Communities & Local Government department and the Land Registry.
Halifax, Nationwide and Acadametrics all produce their own, as well as a survey looking at trends in the market carried out by the Royal Institution of Chartered Surveyors (RICS). Intelligence group Hometrack and property website Rightmove also track house price movements.
Each index is based on slightly different data and therefore they regularly produce contrasting results. For example, in July Nationwide reported that house prices fell 0.5 per cent but Halifax said they increased by 0.6 per cent.
The reason for the discrepancy is that the indices record house prices at different stages of the home buying process, ranging from when the property first goes on the market to the point when the sale is completed.
There are also differences in how the data is compiled with the Land Registry using property registrations and the RICS collecting responses to a survey. Some indices only cover England and Wales, while others look at the entire UK, again producing conflicting data.
Robert Bartlett, CEO of Chesterton Humberts, believes the Land Registry is the most comprehensive index as it gives a detailed breakdown of property prices by local authority, but says as it takes place after the sale is complete it lags behind others like RICS, Halifax, Nationwide and Rightmove.
The UK Statistics Authority has stressed that its review is not a criticism of the current system or a result of complaints. It says the first stage of the review will focus on how satisfied users are with the government’s two indices and the second stage will look at the market more generally and compare all the various indices.
Stuart Law, chief executive of Assetz a property investment company, comments: "In addition to the capacity for contradiction across the indices, I have always maintained that individual monthly indices from specific providers should not be viewed as reliable market indicators in themselves. Property is an illiquid asset and minor monthly fluctuations recorded by a specific organisation cannot be generalised to the sentiment of all homebuyers."
Law warns that even seasonal adjustments between the indices can provide volatility as they are set at the discretion of the organisation producing them, leaving political decision making to impact on the data.
Anyone who uses information from the various indices is invited to take part in a questionnaire throughout August at housingstatisticsnetwork.co.uk, and the review will report back by the end of the year.
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