What do the property indices actually tell us?
Jun 11, 2008
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Britain’s love affair with property has led to a boom in the number of indices measuring the market. But what does each index actually measure – and when?
Rightmove is based on sellers’ initial asking prices, so has the most timely data. But any later cuts in asking prices aren’t included, so the index may be a better measure of how optimistic sellers feel rather than a guide to prices.
Latest: Asking prices in May rose 2.2% year-on-year, to an average £242,500.
Bank of England mortgage approvals. Every month the Bank reports on the number of mortgage approvals and amount of mortgage lending. Although it says nothing on prices, it is a good forward indicator. A drop in the number of mortgages being approved is the first sign of a slump in the property market.
Latest: banks granted 58,000 loans for house purchase in April, the lowest since comparable records began in 1999.
Royal Institution of Chartered Surveyors. Every month the RICS asks its members for their views. The survey does not measure prices, just whether surveyors thought prices rose or fell in the prior three months. It is usually among the first to show a change in market direction.
Latest: in April, 95.1% of surveyors reported that prices were falling, the most since the survey began in 1978.
Halifax and Nationwide is the most widely followed and among the oldest of the housing market indices. Each is based on the lender’s own mortgage approvals, and excludes cash sales. Of the two, Halifax has the larger customer base and sample size. Both are ‘seasonally-adjusted’, meaning they account for the market slowing in winter and being busier in spring. Latest: Halifax said house prices fell 0.9% year-on-year in April to an average £189,027.
Nationwide reported an annual fall of 4.4% in May, giving an average house price of £173,583.
HM Land Registry records every property sale in England and Wales, including cash sales. But the length of time taken for sales to complete means it is the last index to be published in any time period, so it’s little use for forecasting.
Latest: prices rose 2.7% year-on-year in April, to an average £183,626.
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