UK Residential Property Price Indices in Competition

Of the seven indices followed by Bloomberg, including Halifax and Nationwide, only 5 out of the last 22 months showed consistency in the direction of residential house prices in the UK.

According to Fionnuala Earley, an economist at the Royal Bank of Scotland Group, when the indices are subject to a low number of transactions or when the markets are near a turning point, then data is especially volatile - which could explain the recent opposition of results between indices.

The primary housing market statistics used includes the Land Registry, which records the actual price paid in residential property transactions that take place in England and Wales, and the indexes from lenders Nationwide and Halifax, based on mortgages that they offer to the market. Others are private proprietary indices, such as Rightmove’s index utilising a sample of asking prices from the largest UK residential property website. Another one is by Acadametrics, a research company combining transaction data from the Land Registry and other price measures to generate a monthly estimate. The estimate is then retrospectively revised as more complete data becomes available.

However, there are fundamental problems facing these indices. Rightmove provides timely information, but asking prices are also strategically upward biased and Academetrics though rigorous, is based on an estimate and is less timely. Halifax and Nationwide have less data to compile their index because the mortgage market has been hit hard in the last few years, making the results much more volatile. And the problem with the Land Registry is that property types and characteristics are not distinguished. Overall, each index is based on a slightly different data set

The UK Statistics Authority in August launched a review into the “coherence and comparability” of the two indices provided by the government (Communities & Local Government department and the Land Registry) and will seek to assess public opinion with regards to both public and private sources of housing market statistics. The UK Statistics Authority is due to report back at the end of the year and hopefully a solution to promoting greater consistency among benchmarks will be revealed.