Which is the best residential property price index?

Which is the best residential property price index?

If you are a property investor looking to conduct thorough due diligence before purchasing property, which of the conflicting reports from different monthly house price indexes do you rely on?

Below is a quick overview of the four main index providers, provided by Quick Move Now!, along with some handy notes for how to interpret their data, and a comparison of their reporting of residential property prices during 2012 

Nationwide House Price Index

Calculation
The percentage change in average price agreed on a property being bought using a Nationwide mortgage at the final approvals stage across the whole of the UK.

Pros
• Longest running house price index with data going back to 1952

Cons
• Relatively small sample size
• Only takes into account mortgage purchases

What they said happened with residential property prices in 2012
-1.1%

Halifax House Price Index

Calculation
The percentage change in the average price agreed on a property being bought using a Halifax mortgage at the approvals stage across the whole of the UK.

Pros
• Three month rolling average to iron out short-term fluctuations

Cons
• Relatively small sample size
• Only takes into account mortgage purchases

What they said happened with residential property prices in 2012
-1%

Nationwide and Halifax residential property price indexes are usually fairly similar, particularly over time, suggesting that their mix-adjusting removes any regional bias. Despite the small sample size and the fact that they discount cash buyers, they give a good overview of what’s happening in the UK mortgage market.

Land Registry House Price Index

Calculated
Percentage change in purchase price of residential properties bought using a mortgage or cash in England and Wales.

Pros
• Based on final, actual selling price
• Based on repeat sales
• Includes cash buyers
• Revised continually so very accurate

Cons
• Time lag between houses being sold and the transaction being registered
• Does not include new builds or properties not previously sold since 1995

This index is probably the most trusted, although it takes at least 3 months for the data to be published. It is useful for examining at historical trends.

What they said happened to residential property prices in 2012
+1%

Rightmove House Price Index

Calculated
The percentage change in residential property asking prices in England and Wales from the asking prices of homes newly listed on the website.

Pros
• 90% of properties for sale are listed on the Rightmove portal so very large sample (120,000 properties a month)

Cons
• Asking prices often bear no relation to actual selling price

This is often used as the first stop for many property investors to gauge the average prices in statistical form and it can be a really useful barometer for judging confidence in the market. If this index suddenly changes it provides a snapshot on the overall confidence in the market.

What they said happened to residential property prices in 2012
+2.4%

Looking at the change in residential property prices that all of these indexes report for the year of 2012,

  • Rightmove is over-enthusiastic,
  • Nationwide and Halifax are on the negative side 
  • The Land Registry is in the middle

More or less what you’d expect taking into account how they’re all calculated.

So, who’s right? Well, they all are! As long as you know the basic differences between them, you can look at the picture as a whole (for both monthly and annual analysis) and that will give you a good feel for what’s happeningin the UK residential property market. Using that methodology – you can see that in 2012, house prices were largely unchanged.

Many thanks to Donna Houguez, Market Analyst at Quick Move Now for the data

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