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House prices: Which data can you trust?

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Every month, a number of house prices reports are published that each examine the fluctuations in the market compared to previous months and years.

While this general sentiment is usually one of growth across the UK, the actual rate of growth and property values can vary significantly depending on who has compiled and published the information, and the criteria they used to compile it.

For current and prospective homeowners, it can create a degree of confusion about the exact direction the market is taking. Therefore, we have compiled this guide to explain the differences between the reports and how to best interpret the information to create the clearest picture possible.

Two of the most commonly referenced reports when publishing house price data are compiled by Halifax and Nationwide, both of which publish monthly updates to explain any monthly, quarterly or annual fluctuations.

Halifax House Price Index

The Halifax House Price Index is the UK's longest running monthly house price series, with data going back to January 1983.

From this information, a standardised house price is calculated and property price movements are analysed on a like-for-like basis, including seasonal adjustments.

An annual change is calculated as an average for the latest three months compared with the previous year’s data from the same period. Halifax says this data helps to provide a better picture of the underlying trend compared to a monthly year-on-year number, as it smooths out any short-term fluctuations.

In short, it means that house prices released in March will cover the period between December 2015 and February 2016, and be compared to the same three months from December 2014 to February 2015 when being calculated on an annual basis.

Meanwhile, the quarterly change will compare December to February property values with those of September to November 2015, and the monthly change will be compared with November 2015 to January 2016.

In addition to house prices across that period, the report also monitors the number of house sales, mortgage approvals, supply compared to demand, and new homes being built, to create an overall assessment of the property market.

The report is based on Halifax’s own activity, which represents 20 per cent of the UK market, so is a significant proportion yet incomplete view.

Nationwide House Price Index

Nationwide’s monthly house price report stretches back to 1991, although its quarterly price data can be tracked back to 1952.

Indices and average prices are created using data drawn from Nationwide’s house purchase mortgage lending at the post survey approvals stage, and seasonally adjusted.

As with the Halifax index, the Nationwide report uses the US Bureau of the Census X12 method to create an overarching picture of price fluctuations.

It also registers changes on a monthly, quarterly and annual basis to create three distinct comparison points.

The report also monitors buyer and potential buyer sentiment, including the number of renters who expect to buy a property in the near future.

The survey is based on Nationwide’s own activity, which represents 13 per cent of the UK market and, like Halifax, offers a substantial yet incomprehensive overview.

Differing data

Although together the surveys represent almost 40 per cent of the UK market, the data contained within them can differ greatly due to the fact that it is based on individual customer and transaction information.

This can result in contrasting pictures of the market, with one stark example being the figures for February 2016.

Halifax’s new report shows that house prices have risen by 9.7 per cent over the past 12 months, with the average UK home now valued at £209,495. Despite the annual increase, Halifax calculates that property prices fell between January and February 2016, with a 1.4 per cent decrease observed.

According to Nationwide, prices have only risen by half as much over the past year, with a 4.8 per cent annual increase in home values. It also values the average UK home at £196.930 – more than £12,000 less than the Halifax. However, Nationwide estimates that prices actually increased by 0.3 per cent in February, which is at odds with Halifax’s calculations.

Who do I believe?

No survey can paint a complete picture of the housing market unless it uses all available data, which makes it difficult to accept the Halifax or Nationwide surveys as full and accurate reflections.

A more accurate indicator may be to look at wider trends over a long period; in this instance, it can be ascertained that house prices have indeed increased over the past 12 months, with a near constant monthly and annual increase observed between February 2015 and February 2016.

In terms of painting an accurate picture of the market, the most reliable figures are actually produced by the Land Registry. It tracks data for every property that has sold since 1995 and, although published a month later than most lenders’ data, is a far more comprehensive indication of market activity, although it only covers England and Wales.

In Scotland, a monthly survey of house prices is compiled and published by the Registers of Scotland, using a basic average of house prices, while the Land and Property Services and the Northern Ireland Statistics and Research Agency is responsible for creating a quarterly house price index.

Consulting all of the above data – as well as information from the Royal Institution of Chartered Surveyors and the Office for National Statistics – can paint a fairly reliable picture of the market, but it is important to bear in mind that tracking and predicting changes in house prices is not an exact science, and is liable to fluctuate regularly based on a range of unforeseeable factors.


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