The Office of National Statistics has released a consultation the development of a single official house price index, amid signs of confusion at various data sources and indices which give wildly differing accounts and outlooks on the housing market.
The consultation opened last week and is seeking views regarding the ONS’ proposed methodology for a new index for official house price data.
As the document notes, the ONS and Land Registry already publish statistics, along with separate registers in Scotland and Northern Ireland.
“These various measures can sometimes lead to contradictory messages for users who are unfamiliar with the differences in methodology and scope of each measure. This in turn can make decision making difficult based on the house price data available.”
The National Statistician’s Review of House Price Statistics in 2010 led to a recommendation that “a single definitive house price index and accompanying statistics should be produced by the official statistics producer community”.
A cross-department working group has developed a methodology over the last 18 months, with national and regional data to be broken down by type of dwelling, type of buyer, age of property and type of sale.
The consultation added: “While there is no firm commitment to implementation at this stage, it is hoped that the feedback received will allow the methodology and development costs to be finalised so that each department can then commit to the implementation.
“Should the development get approval, it is anticipated that a new definitive index will be ready for publication in early 2016.”
The sheer volume of house price data - much of it coming from private sector sources and similarly based on different methodologies - has often been the subject of debate in the market as the usefulness of various projections.
Last Friday (10 October) Rightmove predicted that average house prices in England and Wales are set to increase by 30 per cent in the next five years, just a few days after the Centre for Economics and Business Research said UK house prices will dip by 0.8 per cent next year.
Sue Anderson, head of member and external relations at the Council of Mortgage Lenders, explained that the methodology of different indices varies and, while there is nothing wrong with having multiple indicators, people need to ensure the index is “fit for purpose” for their needs.
The Moneyfacts Group’s insight team said that if predictions are solely based on housing stock supply and demand, there is no doubt that predicated property values will be higher.
A Moneyfacts spokesperson said: “The difficulty in the relating predictions and actual house prices is the UK housing market is influenced by supply and demand in the market. Focusing on factor alone is not going to give you an accurate result.”
Moneyfacts’ team noted that current benchmarks for average house prices, i.e. Halifax and Nationwide, use data from their own lending statistics.
“Even though these providers have a large proportion of market share this data will not could not be construed as a true national average as there are multiples of lenders active in the market.
“If the data is available, one central house price index would be a truer and much more reliable benchmark. This could only be done by an official organisation because it would need mandatory for mortgage providers to submit their lending information.”
Fionnuala Earley, residential research director at estate agent Hamptons, told FTAdviser that all indices have their upsides and downsides.
She explained that the Land Registry uses a matching approach as it only works with housing that has already been sold, excluding new properties. Likewise, ONS data is also based on completions, while the big two lenders that compile house price indices, Halifax and Nationwide, also employ different ‘econometrics’.
“All indices move in the same way eventually, but monthly variances occur and can cause confusion; but you just have to stand back a bit and look at the bigger picture.
“Every index will have its drawbacks, but if you creates a single index you’d be putting all your eggs in one basket. At least with the current system you can compare and contrast, so if one stands out you can almost peer review it to see whether it’s wrong or right.”
The ONS consulation closes on 12 December.
peter.walker@ft.com
