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House Price Indexes
Keeping track of house prices is essential for anyone thinking of buying or selling their home and one way of doing this is to look at the various house price indexes that are published. However, there are many ways of measuring house prices and this can sometimes lead to confusion when trying to compare reports from different sources. Here is a summary of the main UK House Price Indexes that are currently available.
DCLG (www.communities.gov.uk)
Produced by the Department of Communities and Local Government, in conjunction with the Office for National Statistics, this index is based on a sample of completions data (about 50,000 per month) from around 60 mortgage lenders who supply data through the Regulated Mortgage Survey of the Council of Mortgage Lenders. The index is weighted to reflect the pattern of property transactions during the previous 3 years and this changes each year, so whilst house prices within the year are comparable - they are all based on the same weighting - house prices between years cannot be compared because last year's weights and this year's weights are different. A month on month comparison of the DCLG index and price is not advised, as the series are not seasonally adjusted and comparisons over periods of less than a year will be affected by seasonal fluctuations.
FT / Acadametrics (www.acadametrics.co.uk)
The FT House Price Index, produced by Acadametrics, comprises the published Land Registry house price data, smoothed and seasonally and mix adjusted, combined with an "index of indices" forecasting model to account for transactions not yet reported to the Land Registry. The FT index includes cash purchases and is the only index to use all of the Land Registry data. As such, it aims to provide a factual record of domestic property prices in England and Wales and a true guide to house price inflation.
Halifax (www.hbosplc.com)
Based on mortgage approvals of loans agreed by Halifax Bank of Scotland (HBOS) over the previous month, seasonally adjusted. Launched in 1984, this is based on the lending of the UK's largest mortgage lender and provides the longest unbroken monthly data series of any UK housing index. The standardised average price is calculated using the Halifax's mix adjusted methodology.
Land Registry (www.landregistry.gov.uk)
This index measures changes in the value of residential properties, using sales data collected on all residential housing transactions, whether for cash or with a mortgage, and is the only index to be based on repeat sales. The index is calculated by using the Land Registry's own 'Price Paid' data, the only complete record of all residential property transactions made in England and Wales since April 2000, containing details on nine million sales. Of these, around 2 million are identifiable matched pairs, providing the basis for the repeat-sales analysis used to compile the index, which ensures an 'apples to apples' comparison between properties. The standardised average house prices are calculated by taking the geometric mean price in April 2000 and moving this in accordance with index changes and adjustments to isolate the effects of seasonal trends.
Nationwide (www.nationwide.co.uk)
Based on mortgage approvals of loans agreed by Nationwide Building Society over the previous month, seasonally adjusted. Indices and average prices are produced using Nationwide's updated mix adjusted House Price Methodology. The calculations are based on monthly data starting from January 1991 and are recalculated each month, which may result in revisions to historical data.
Rightmove (www.rightmove.co.uk)
Compiled from the actual asking prices of properties coming onto the market through 12,500 estate agency member branches over the previous month. The sample includes up to 200,000 homes each month, representing around 90% of the market. The index differs from other house price indicators in that it reflects asking prices when properties first come onto the market, rather than those recorded by lenders during the mortgage application process or final sales prices reported to the Land Registry. In essence, Rightmove's index measures prices at the very beginning of the home buying and selling process, while other indices measure prices at points later in the process. Having a large sample size and being very up-to-date, the Rightmove Index has become a reliable indicator of current and future trends of the housing market. The index is not seasonally adjusted.
Seasonal Adjustment
Seasonal adjustment is a process by which changes that are due to seasonal influences are removed to produce a clearer picture of the underlying behaviour. Rightmove measures asking prices and does not seasonally adjust its figures, while Nationwide and Halifax both report data based on mortgage offers, seasonally adjusted. The DCLG index, also based on mortgage offers, is not seasonally adjusted. The Land Registry index is seasonally adjusted.
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