Working out the direction of UK house prices is unnecessarily difficult. In September, data from Nationwide Building Society, the Financial Times and the Land Registry all showed month- on-month gains. But house prices fell according to Halifax, Rightmove and the Royal Institution of Chartered Surveyors. There was also a difference of five percentage points in the highest and lowest year-on-year comparisons. The housing market has never received so much economic analysis and press coverage as it does now. As with any fluctuating marketplace, providing an accurate forecast is tricky; the range of conclusions reported recently is misleading, and must, therefore, be used circumspectly, particularly by those buying and selling at the top end of the market.
Some numbers are survey-based, some use asking prices, others refer to under-offer prices and others to the final completion price. Clearly, there are time delays between each stage. Just to confuse things further, some indices are adjusted for inflation and seasonality. There are three main residential property indices those produced by Halifax, Nationwide and the Government’s own Land Registry. These are supplemented by new database systems such as Hometrack and a number of other regular surveys by estate agents and some more anecdotal ones by organisations such as the Royal Institution of Chartered Surveyors.
Indices provide evidence of market trends, but don’t directly reflect what is happening to your own property. The majority of reports are based around the movement of the ‘average house price’, currently about £200,000. So if you do NOT live in an average house, you have to question the relevancy of statistics referring to average houses. The housing market is incredibly polarised; different price brackets and property types can behave entirely independently from one another even within the same region.
The monthly reports by Halifax and Nationwide are based on a selection of mortgage offers made by each company that month, rather than actual sales prices or completions for the month. They can be useful for an overall view of what’s happening in the mainstream market and trace the movement of a basket of ‘typical’ properties. This probably makes them more useful to the Bank of England when setting interest rates than for prospective house-hunters in the market at the time.
As they don’t include property which is deemed to be outside the conventional market any property worth more than £1 million, flats over 2,000sq ft or houses over 3,000sq ft and both indices miss out on any property bought without a mortgage (about 20%25% of all sales), neither is particularly useful or relevant at the top of the market. As their sample can be based on every transaction, the Government’s own Land Registry provides an accurate picture of price movements across the UK as a whole. However, the analysis is taken from completion dates and is released quarterly, which means it can lag a long way behind conditions at the time of release.
Market trends can be often cloudy and Chinese whispers are legendary. Moving house for many is a large financial commitment. Common sense as opposed to economic indicators suggests that the best advice often comes directly from the coalface. When buying or selling, a more useful perspective will come from an experienced agent who specialises in your sector of the market. It is these property people who are the ones who actually see and feel the market fluctuate on a daily basis. It’s not possible to understand a property market just by looking at the numbers. Where we live has a bigger impact on our quality of life than any other expenditure. How can the behaviour of someone buying their family a home lend itself to statistical analysis? Of course, everybody concentrates on finding value, but we will always pay as much as we can, to live in the nicest house we can afford.
Although our financial position will affect how much we can pay for a house, the decision to buy a particular property is far from rational. And it’s certainly not predictable.