Government investigates house price indices

Concerns that different methods for calculating house prices are confusing buyers and homeowners has prompted the goverment to review its two major house prices indices, according to the National Statistician.

A number of different indices are used to measure house prices including two by the government; ones from Halifax, Nationwide and Rightmove as well as a market trends' survey by the Royal Institution of Chartered Surveyors (Rics).

The issue raised is that most of the indices record house prices at different stages of the home-buying process, ranging from asking prices when a property is first put on the market to the price paid at the completion of sale. The data used to compile the indices also differed.

The ONS review will initially focus on house price indices published by the government which should be completed by the of this year. The review will then consider house price statistics more broadly to see how useful they are to the public.

The review was not a response to problems reported by either of the main government indices, said ONS.

Stuart Law, chief executive at Assetz, said the differing pictures produced by monthly house price indices frequently offered a confused picture of the UK property market.

He said: "This is especially true at times of major price correction, when contradictory patterns of positive and negative growth emerge between the indices, as seen several times during the recent recession.

"Property is an illiquid asset and minor monthly fluctuations recorded by a specific organisation cannot be generalised to the sentiment of all homebuyers.

"Even seasonal adjustments recorded by some of the major indices can provide a basis for volatility between the different monthly figures, as these are set at the discretion of the organisation that produces them, leaving room for semantic and political decision making to impact on the data."