Every month, a variety of organizations release house price indices based on different sets of data. Sometimes these findings align, while other times they conflict. While we do provide explanations of these figures when reporting on them, we believe it would be helpful to provide a comprehensive guide to the main indices. Whether you are involved in buying or selling property, working in the real estate industry, or simply interested in the housing market, it is valuable to know the specific details of each index, including who produces it, what data is used, and what the headline figures represent.
For further analysis and discussions on the different indices, we invite you to visit our house prices blog. There, you can share your thoughts and opinions.
To explore the different indices, you can click on the links below:
– Halifax
– Land Registry
– LSL Property Services/Acadametrics
– Nationwide
– Office for National Statistics
– Rightmove
– Royal Institution of Chartered Surveyors
Now, let’s delve into the details of each index:
1. Halifax:
– Compiled by Halifax, a part of Lloyds Banking Group and one of the largest mortgage lenders in the UK.
– Shows the average price agreed upon for a property purchased using a Halifax mortgage, along with the percentage change in price over the month and year. Regional data is available in quarterly surveys.
– Covers the entire UK.
– Time period covered is a full calendar month: from the 1st to the last day.
– Based on mortgages approved by Halifax.
– Halifax utilizes a “hedonic method” to standardize the figures. They assess certain attributes of the properties being bought, such as the number of rooms, presence of central heating, and existence of a garden, to calculate the price of a “typical house.”
– Trustworthiness: Halifax, being one of the UK’s largest lenders, has conducted the survey consistently for almost three decades. However, skeptics argue that the data may be skewed during months with low transaction volumes and that their typical house may not represent the average UK house due to historical northern bias.
2. Land Registry:
– Compiled by the government’s Land Registry department, with data compiled by Calnea Analytics.
– Shows the average asking price of properties purchased in the past month. This includes prices on completion, encompassing both cash purchases and those financed through mortgages. It also reports annual and monthly price changes.
– Limited to England and Wales.
– Time period covered is a calendar month.
– Based on prices paid in residential sales completed during the month and reported to the Land Registry. Approximately 35% of sales are reported by month-end.
– The Land Registry removes properties that have not been sold at least twice since 1995 from the sample. Their index uses the repeat sales regression method. The baseline price is set at the average price in April 2000, and subsequent growth is measured from that point to determine the current average price.
– Trustworthiness: The Land Registry claims its index is the most accurate and independent house price index available. It is the only index based on repeat sales and includes data from all sales, whether mortgaged or not. However, the index is revised each month due to the time lag between completions and registrations, which means the figures may slightly change.
3. LSL Property Services/Acadametrics:
– Compiled by Acadametrics, a consultancy specializing in property and mortgage risk assessment, on behalf of LSL Property Services, a property company that owns estate agency firms and surveyors.
– Shows the average price of a property purchased and registered with the Land Registry over the past month, including monthly and annual changes and the number of sales.
– Covers England and Wales, with a separate index for Scotland based on the Registers of Scotland.
– Time period covered is a calendar month.
– Based on the Land Registry’s house price data.
– The Land Registry provides data on all reported sales from the month, including those completed in previous months. Acadametrics uses a “mix-adjustment” process to calculate an average price that is not skewed by changes in the types of properties sold month-to-month. Since only around a third of sales completed in a month are reported by month-end, an “index of indices” model is employed to estimate the final figure once all sales are in.
– Trustworthiness: The data set used is extensive, covering completed sales financed with mortgages and cash, including new-build properties and older homes. The “index of indices” calculation enables it to be more up to date than the Land Registry. However, the figures may change once all sales are reported, and monthly figures are often updated with data from previous months.
4. Nationwide:
– Compiled by Nationwide, the UK’s largest building society and a major mortgage lender.
– Shows the average price agreed upon for a property bought using a Nationwide mortgage, along with the percentage change in price over the month and year. Regional data is available in quarterly surveys.
– Covers the entire UK.
– Time period covered is ostensibly a calendar month, although the specific end date is not disclosed by Nationwide for commercial reasons.
– Based on Nationwide mortgages at the approvals stage, after the valuation has been carried out. Nationwide holds about 10% of the gross house purchase market share.
– Certain property types, such as buy-to-let and right-to-buy properties, as well as very small or very large homes (with specified limits for each property type), are excluded. The prices are then “mix-adjusted” to determine the price of a “typical house.” Various factors like location and number of bedrooms are taken into account to estimate the average cost of a house based on these characteristics.
– Trustworthiness: Nationwide claims its index can handle low numbers of transactions and is seasonally adjusted. However, skeptics argue that the excluded properties and mix-adjustment process may affect the accuracy of the index.
In summary, each house price index provides unique insights into the UK housing market. By understanding the methodologies and data sources behind these indices, you can make informed decisions and interpretations. However, it is essential to be aware of any limitations or biases associated with each index to ensure a comprehensive understanding of the market dynamics.
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