House market surveys: an introduction
Almost every week there is a new survey about the UK housing market and this blog often discusses the information they contain. This week, however, rather than simply discuss another survey I shall discuss the firms behind the surveys, why they do it and what the data means.
The most recent survey to be launched, and which has also become the most authoritative, is from the Land Registry, which records all completed property sales in England & Wales. It now publishes a monthly report on house prices in addition to its quarterly survey but it has been recording the price of all property sales since April 2000.
Of the more than seven million sales since then, 1.4 million have involved the same house being sold again. The Land Registry uses something called Repeat Sales Regression to measure the change in prices over time. In essence, this means it is comparing the price of properties sold now with the price paid when it was sold before.
The proceeds of all the transactions are totted up, and then divided by the total number of sales to reach an average sale price. However, repossessions and property transfers following a divorce are excluded to avoid skewing the sample.
Because it takes virtually all residential property sales into account, the Land Registry’s figures can provide a unique insight into not only national but local prices. In fact, the Registry can provide an accurate picture of prices down to postcode level. However, since the survey comes out only once every three months, the figures are out of date by the time they are published.
The government has its own monthly house price index, issued by the Department for Communities and Local Government (DCLG). It uses lending information from about fifty lenders, which is collected through the Survey of Mortgage Lenders.
Unlike the Land Registry survey the new government index does not contain information on cash purchases, which account for about a quarter of the market and another drawback is that it is not very timely. It only appears two months in arrears.
But the survey offers indexes for the whole UK, the major regions and one for first-time buyers. Unlike the Nationwide and Halifax surveys which are weighted according to transactions, the new survey depends much more on the total amount of money spent. Relying on expenditure in this way will mean that London and the South East, where house prices are highest, will have a greater influence on the government’s index.
Perhaps the best known snapshots of the property market are provided by Britain’s two biggest mortgage lenders, Nationwide and Halifax. These surveys feature extensively on this blog. Both surveys cover the entire UK, rather than just England and
Wales.
Their figures are often very similar, as they are both based on the price agreed after a survey by their mortgage customers. However, like the new government survey, they are based only on property sales financed by mortgage lending, ignoring sales which are transacted on a cash basis.
The Royal Institution of Chartered Surveyors (RICS) survey reflects confidence in the property market rather than what is actually happening to house prices. Three hundred surveyors and estate agents in
England & Wales are asked if they feel prices are falling or rising.
Respondents are also quizzed on a host of other related issues, such as whether the number of buyers and sellers are rising or falling. Generally speaking, the RICS survey is the first to show any sea change in the market. Because each of these reports are conducted using different methodology and at different times the reports that come out often have very different, even contradictory results. This is especially the case when the UK housing market is in a volatile state as it is now on the back of a shaky economy. They are, nevertheless, useful, in building a picture of the housing market for professional analysts and consumers alike.
