Can you trust house price indexes?

House price indexes always grab the headlines as they feed into the UK’s obsession with seeing how much their home is worth. Have you ever stopped to question, however, why there are multiple house price indexes and the methodology behind the statistics? Move Place delves a little deeper to find out whether you should rely on the figures that make the front pages.

The press went wild for Nationwide’s November house price index that showed the average value of a UK property had tipped over £250,000 for the first time. By charting monthly property values, the building society – and other organisations, including Halifax and Land Registry – can illustrate whether property values are rising or falling on a monthly or annual basis.

Many property owners use house price indexes to gauge whether their own property has gained – or lost – value but there’s more to each figure than meets the eye, as Move Places.

The most important aspect is generalisation. House price indexes trade in ‘averages’ and not specifics. Although the average annual property price has risen approximately 10% in 2021, your own property’s value may have appreciated at a slower rate, stayed the same or even decreased in value.

Let’s look at one of the most widely reported house price indexes. Nationwide uses information from its mortgage lending to owner-occupiers and its ‘typical’ UK house is a fabricated entity. It also works on varying sample sizes and doesn’t take into account every property sold in a given month. It’s a complex process but if you’d like to know more, you can read Nationwide's full house price index methodology.

The freely available methodology behind the Halifax’s house price index sheds further light on the variable nature of the figures that make it into the press. For example, the Halifax’s index excludes the sales of certain properties not sold at ‘normal’ market values, such as those with sitting tenants and shared ownership homes. Crucially, the data used refers to ‘mortgage transactions at the time they are approved, rather than completed’, which doesn’t reflect what the borrower actually paid for a property upon completion.

For a house price index that uses the price paid for a property on completion – a ‘warts and all value’ that takes into account the impact of survey results, any negotiation and down-valuing, the Land Registry’s house price index is the one to watch. Its methodology uses sales data collected on residential housing transactions, whether for cash or with a mortgage, to draw its monthly conclusions. Such is its accuracy that Land Registry’s figures are used by central Government and by Move Places when providing a property valuation.

Even then, your own house price depends on unique circumstances that a big organisation won’t be able to take into account, such as its condition, its lease, improvements recently made and local demand. Only a reputable agent can give you an accurate, real-time figure and our Managing Director, Jason Harris-Cohen, explains a little more about valuations and how a cash sale to us works in this video.

Our team of valuers are on hand with a free valuation if you’re curious about your home’s current value, and we’ll explain how we use our vast bank of industry knowledge and a variety of trusted sources to suggest valuations that are designed to sell property fast. Don’t forget, our valuations are much more accurate than any house price index so if you’re serious about selling, contact us today.