What’s the truth about house prices?

The newspapers might tell us that the housing market is about to fall off a cliff, while other commentators speak of localised corrections, and a 5% fall at most.

With many of us worried about the price of our homes, where should we really go for the facts and figures that we can trust?

At Continuum we are looking for some answers.

You choose your house price index

There are at least four house-price indices that track the rate of increase – or the sudden falls –  in the value of our properties. Nationwide, Halifax, Rightmove, and the Office for National Statistics all provide the facts and figures. But although each one is carefully compiled and checked, they are rarely in complete agreement.

So why do they differ, and which one should you follow if you are planning a move or a property investment decision?

Nationwide

The Nationwide House Price Index is one of the most popular measures of property costs and dates back to 1952 when the average house cost £1890.

The data shown is the lender’s valuation at the mortgage approval stage, which may differ from the eventual sale price. 

The raw data is given some sophisticated statistical massaging to avoid distortions, which would occur for example if a large number of high-priced homes were sold one month.

Latest figures from the Nationwide: house prices fell by 0.9% in October after an annual growth of 7.2%. The average price stands at £268,282.

Halifax

Halifax House Price Index data goes back to 1983 and, like the Nationwide index, is based on the bank’s valuation at the mortgage approval stage.

A standardised house price is calculated using this data and property price movements on a like-for-like basis – but the figures are a little different to the Nationwide, simply because they look at a different and slightly smaller sample, historically with a bias towards the North of England.

Latest figures from the Halifax: House prices fell by 0.4% in October after an annual growth of 8.3% over the last 12 months. The average house price stands at £292,598.

Rightmove

Rightmove is a leading property website, covering the country, and used by most estate agents to showcase properties. The Rightmove house-price index takes a different approach to that of the building society indices. Rather than being based on professional valuations, it is based on the asking price – which may depend on the enthusiasm of the agent and the optimism of the vendor. Asking prices can drastically differ from the prices at which houses are actually sold, if they are sold at all.

Latest Figures from Rightmove: asking prices fell by 1.1% in October after rising by 7.8% in the previous 12 months. The average asking price stands at £366,999. 

ONS/Land Registry House Price Index

The UK House Price Index (HPI) might be the most authoritative index.  There is some statistical work carried out to provide a view of the direction and extent of house price changes, but the underlying data is a simple average of the actual sold prices achieved on property sales each month. 

It is calculated by the Office for National Statistics and uses house sale data from HM Land Registry, Land and Property Services Northern Ireland, and Registers of Scotland.

Latest figures: UK house prices were static in September, and risen by 9.5% in the previous year, to an average price of £294.559.

So which should you believe?

The various indices may not agree, although there does seem to be a consensus in that they all indicate a slowdown in the property market.

The differences stem from the fact that they are using different data to answer the question of how much a home costs.

Rightmove looks at what vendors want for their homes, Halifax and Nationwide take the professionals view of what a property is worth – and the ONS/Land Registry House Price Index shows what properties actually sold for.

Property can take months to sell, so the progression from Rightmove with its asking prices to the actual sold prices from the ONS/Land Registry House Price Index might indicate how the market is changing.

One thing you can be sure of – if you are looking at the price of your own home or considering a purchase, you need an expert to help with your mortgage needs. 

At Continuum we will be very pleased to provide the expertise you need. 

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable mortgage product, you should seek independent financial advice before embarking on any course of action.

Your home may be repossessed if you do not keep up repayments on your mortgage. 

House price index | Nationwide

https://www.halifax.co.uk/media-centre/house-price-index.html

https://www.rightmove.co.uk/news/house-price-index/

https://landregistry.data.gov.uk/app/ukhpi

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