As the property market has boomed over the past decade, so has the number of indices measuring the market – all giving slightly different results. This is handy for journalists, who can pick and choose statistics to fit their own outlook on the market. For example, last month the Daily Express proclaimed that homeowners had made £85 a day in April as “house prices jumped by more than £2,500”. Just ten days earlier, the Daily Mail had cited falling mortgage approvals as a sign that “the market is cooling”. With so much conflicting information out there, who should you pay attention to?
Rightmove
Probably the most timely data come from Rightmove, which has produced a monthly price index since 2002. The index is based on sellers’ asking prices, making it very up-to-date. However, it is intrinsically optimistic: it doesn’t take into account cuts in asking prices from one month to the next, and the calculation process isn’t transparent – so it should be taken with a pinch of salt.
Last reading: prices rose by 0.8% last month to an average £239,317, an annual increase of 13.2%, up from 13.1% in May.
Bank of England mortgage approvals
The Bank of England produces a monthly report showing the number of mortgage approvals and the amount of mortgage lending. This gives a good idea of what should happen to prices in the future – a drop in the number of mortgages approved is the first sign of a slump in the property market. If fewer people are arranging loans, that means fewer buyers – and when buyers dry up, prices tend to fall. On the other hand, rising demand usually drives up prices.
Last reading: the latest figures show that mortgage approvals rose from 109,000 in April to 114,000 in May.
Halifax and Nationwide
These are among the most widely quoted indices. Nationwide has been publishing house-price reports since 1952; the Halifax has been running since 1984. Both are based solely on their own mortgage approvals, which means that although they are fairly timely, as the FT points out, “they are prone to sample selection biases”. For example, traditionally a larger chunk of the Halifax’s customers are based in the north. Both also exclude cash sales, which are about 25% of the market.
Last reading (Halifax): prices rose 0.4% in June, to an average £197,461, pushing annual house-price inflation to 10.7% from 10.6% in May.
Nationwide: prices rose by 1.1% in June to an average £184,070, putting annual growth at 11.1%, from 10.3% in May.
HM Land Registry
The Land Registry records details of every property sale in England and Wales. It publishes a Residential Property Price Report every quarter, which reports the average property sale price and the number of sales. The report is the most comprehensive as it includes all housing data, but it is a good few months out of date – so it’s not much use for predicting the future.
Last reading: prices rose by 0.7% in May, to an average £180,594, taking the annual increase to 8.9%.
Royal Institution of Chartered Surveyors
The RICS produces a monthly report on house prices, based on information provided by chartered surveyors. “Put simply, this survey reflects confidence in the property market rather than what is actually happening to house prices,” says the BBC. It’s a survey of what estate agents and surveyors believe is happening to house prices and activity in the market. As consumer confidence has a major effect on the market, the RICS index is usually among the first to show any significant changes in direction.
Last reading: in May a 23.9% majority of surveyors said house prices would rise – down from 28.9% in April.
The IPOD index
This latest, somewhat informal index, has been created by Ross Clark at The Daily Telegraph – but it has the potential to be the most useful of all. The Index of Prices affordable by Overburdened Dreamers (IPOD) looks at the maximum mortgage that the average first-time buyer could get from online broker Charcol. This should provide an interesting forward indicator for the housing market. “House prices cannot rise above the level which buyers can afford to pay,” says Clark, so any sign that banks are tightening their lending criteria – something that is increasingly likely as interest rates rise – is an early sign that the market is likely to fall.
Last reading: the IPOD index currently states that the maximum amount that its average first-time buyer can borrow to spend on a house is £133,655.