The property market surveys explained
There are numerous different reviews of the housing market being reported these days but often offering apparently conflicting viewpoints. ESPC takes a look at some of the major regular reports to help you understand what they are based on, what they tell us and what they mean to you.
Every month there are several different studies issued on the UK housing market in addition to a number of reports looking at local markets around the country. With so much information published it should be easy to get a clear picture of what is happening, but unfortunately each study often uses different terminology and looks at a different aspect of the market.
To make matters worse, even when studies are looking at the same aspect of the market, variances in the data they use, or the methodologies they employ can lead to the results being somewhat different. Here we take a look at some of the most widely reported studies to give you a better understanding of what each one reveals and, more importantly, how you can use them to get a better idea of what is happening in the market in your area.
House Price Indices
Nationwide and Halifax produce the most widely quoted reports tracking national house prices. Both companies adjust their figures to account for two main variables.
- Seasonal factors which influence property prices.
- Changes in the mix of properties (including factors like property type and location) selling in a given period.
In spite of the similar approaches, there are still slight differences in the precise methodologies HBOS and Nationwide use. Both companies also base results on their own individual mortgage data. For these reasons, while the two indices follow broadly similar trends, there are typically differences in the exact average price they quote each period.
At ESPC we don’t adjust our figures according to the mix of properties as we believe it is not possible to accurately account for the wealth of factors that influence prices. To give insight into how prices have changed across the market, we instead track averages for specific property types in certain districts in our quarterly releases. We also don’t seasonally adjust our figures, and for this reason always quote annual price changes. That is to say, we compare prices today with prices during the same period in the previous year.
Over the long run the general trends in each case are very similar, but there is usually an impact from seasonality on ESPC figures.
Other measures
In addition to looking at average property prices, there are a number of other measures that can offer insight into how the market is performing. The Royal Institute of Chartered Surveyors (RICS), for example, issue statistics reflecting the percentage of surveyors reporting rising rather than falling house prices. This can be a useful guide to future price movements before they become apparent in completed sales values. It is worth remembering that this simply a measure of the proportion of surveyors reporting rises and falls and not a direct sign of the size of these changes.
The Bank of England and Council of Mortgage Lenders (CML) regularly issue the number of mortgage approvals. Again these can be useful in assessing demand for property in the coming months.
There are also a number of websites now such as OurProperty.co.uk which allow you to look up the selling price of homes in a specific street. These sites can give a useful guide to the prices being paid in a very specific area you may be interested in. They do not however give details of the size or condition of the properties sold, and it’s worth bearing in mind that even neighbouring properties can attract very different bids. The fact that somebody in your street sold their property for a certain value does not mean you can assume your property will definitely attract that amount.
What it all means to you
There is a wealth of data freely available on the property market, more today than there has ever been. To fully understand what is happening in your area there are a few basic rules you should remember:
- Never look at one set of figures in isolation. Figures for one month or a quarter only give a snapshot of the market and for most people their home is a long term investment. Try to look at how prices have changed over a longer period to understand better what is likely to happen over the next five or 10 years. Bear in mind as well that rapid rises tend not to be sustainable over the longer term, so don’t assume high inflation will be prolonged even in buoyant markets.
- Always look into what’s being reported. A 40% shift in the number of sales doesn’t mean prices have changed by that extent, but it does point to a significant shift in demand that could steer prices in the future.
- If you can, try to find information on the local market – there are often significant differences between what is happening at a national level and what is happening regionally.
- If you’re faced with a number of figures from different sources, try to look for a pattern throughout them. If average prices are rising rapidly, but sales volumes and average premiums are falling for example, this would indicate that the market is likely to cool in the future.
To help in the current climate, ESPC will be producing and publishing regular updates and in depth analysis on the housing market both in The ESPC Paper and online at espc.com. If you wish to receive these reports as soon as they are released, please register free by visiting www.espc.com.