House price surveys explained

We seem to get notified of how house prices are moving every few days. This group says they’re up; this report says they’re down; this chart shows they’re stabilising. How do these house price surveys work and is any one more accurate than the others?

The Land Registry survey is surprisingly the last one that was launched – in October 2006 – but has become well respected in a short space of time. The Land Registry records all property sales in England and Wales and now publishes a report each month on house prices. This is on top of its survey every quarter. The price of all property sales since April 2000 have been recorded by the Land Registry. There have been over seven million sales since the start and 1.4 million, or 20%, have been sales of a property sold before in the records. This has enabled the Registry to use its Repeat Sales Regression to measure how prices have changed over time. Fundamentally it is a simple comparison of the price of a property sold most recently with the price at which it sold before. The quarterly survey of the Land Registry is very comprehensive, but again, quite simply, the total of all sales transactions are added up and divided by the number of sales to give an average sale price. To avoid skewing the figures, repossessions and property transfers, for example after a divorce, are not included. The Land Registry takes into account almost every single residential sale so the figures can give excellent information at national and regional level, down to giving an accurate price picture even down to postcode level. The drawback of the figures from the quarterly survey is that because of its nature of being released every quarter, the figures are actually out of date by the time they can be seen. There is similar information for Scotland called the Regsiter of Scotland.

The Department for Communities and Local Government (DCLG) represents the Government’s own monthly price index, using lending information from around fifty top lenders, being collated by the Survey or Mortgage Lenders. This survey does exclude cash purchases, which are included in the Land Registry survey, and they account for about 25% of the market. This report is also not very timely as it comes out two months in arrears. Nevertheless the survey does provide information for the whole of the UK, breaks out by the major regions and provides an index for first-time buyers. The survey depends a lot of the total amount of money spent, which is different from the Nationwide and Halifax surveys, both of which are weighted according to transactions. Calculating its indexes this way means that London and the South East, with the highest house prices, will have a greater impact on the index of the government.

Nationwide Building Society and Halifax plc are tow of Britain’s largest mortgage lenders. They both provide house price surveys covering the whole of the UK, including Scotland and Northern Ireland as well as England and Wales. The figures in these surveys are based on the price agreed after a sale for the mortgage customers. Like the government survey, these are only based on property sales which use mortgages, ignoring any cash sales, and of course only cover their own customers, so have some limitations.

The Royal Institution of Chartered Surveyors (RICS) conducts a survey into confidence in the property market of its surveyors. This is not a report on what is happening with actual house prices. Its surveyors consist of 300 surveyors and estate agents in England and Wales, and they are asked if they think that property prices are on the rise or falling. The recipients are also asked questions on a number of issues, such as about the numbers of buyers and sellers. Although not based on factual information the RICS survey is often a good predictor of what is about to happen in the market.

Property websites Hometrack and Rightmove have been established for less than ten years, Hometrack first on the scene in 1999. Now they both produce their own house price reports which act as a useful guide to current prices. The Hometrack survey collects data from 3,500 estate agencies around all 2,200 postcode districts in England and Wales, the estate agents reporting whether prices are going up or down. Rightmove’s survey collates asking prices of houses put on its own website during the previous month. Rightmove claims that it displays about 35% of all home up for sale, in which case the sample size is certainly quite extensive. More than half of the largest estate agencies in the UK do put the properties they have for sale on Rightmove’s site. The big limiting factor with Rightmove’s information is that it is based on the asking price for homes, not the actual amount they sell for in the end.