Chart that tells a story — house prices
01-04-2015
Kate Allen, Property Correspondent
What does this show?
House prices have risen sharply in the past two years — but not all house price data are equal. Depending on which research you follow, prices are either well above their previous record highs, or are not yet even close to reaching them.
So my house is worth more — or less — depending on who is measuring it?
Yes. Each house price index varies slightly, either because it is trying to measure something in a different way or because it selects a different variable.
Surely a house is only worth what someone will pay for it?
That is true when it comes to an individual property. But the thing most people want to know about house prices at a national level is how they are changing. To calculate that, it is necessary to create some kind of average and then track it over time.
Who comes out with the highest rises in value?
Both the Office for National Statistics (ONS) and LSL Acad — an index which the FT helped to set up — say that house prices are more than 10 per cent above their peak levels in early 2008. By contrast, Halifax and the Land Registry have prices still hovering below their previous highs — Halifax shows prices 4.7 per cent below their historic peak.
Nationwide sits in the middle, with prices having only overtaken their previous high earlier this year and now 3.7 per cent above it.
Are there regional differences behind this performance gap?
The Land Registry and LSL Acad only cover England and Wales; the other indices are UK-wide. Of all parts of the UK, England has seen the strongest house price recovery — so it is to be expected that England and Wales-only indices have done better than those that include Scotland and Northern Ireland.
However, there is a difference of 18 percentage points in the performance of the Land Registry and LSL Acad figures, so clearly geographical spread cannot be the only factor.
What else might be involved?
Nationwide and Halifax use their own mortgage completions data based on their definition of a “typical” house. The ONS uses mortgage completions data from the Council of Mortgage Lenders, the industry body. Both approaches exclude properties bought with cash alone.
The Land Registry searches its database of all residential property transactions to identify repeat sales of the same buildings. This omits newly built homes and those which have only changed hands once or not at all since its data series began in 1996.
LSL Acad also uses a selection of Land Registry data, but then applies its own purpose-built model.
So you’re saying I don’t know whether the value of my house is going up or down?
All the indices have shown a similar trend of strong growth over the past couple of years, which has begun to slow in recent months. The picture may become clearer this year — the ONS has just finished consulting on plans to create a new, definitive index which will supersede its current data and the Land Registry’s index.
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