Another week, another house price index. At least that’s how it can sometimes feel, due to the large number of house price indices that are now in operation, all maintaining that their data are the most comprehensive in the market.

This week it’s mortgage lender Halifax’s turn. Its latest index found that average UK house prices increased by 0.6 per cent in January, the second rise in the past six months and the first since October. This takes the average value of property in the UK to £160,907.

However, average house prices in the three months to January were down 0.9 per cent. Experts believe this three-month measure of prices shows the clearest indication of market trends as it smooths out monthly volatility caused by the small number of monthly transactions used to calculate the house price index.

But exactly how much attention should we pay to these indices? As has already been mentioned, indices such as Halifax and Nationwide calculate figures on a very small number of monthly transactions, resulting in prices going up one month, yet down the following month, and so on.

And just how useful are national averages anyway, in a housing market that has such huge regional disparities? Is there really any point in generalising on what house prices are doing in the UK? Do these just paint a misleading picture for readers?

The Land Registry house price index, which covers all house sales made in England and Wales and is typically viewed as the most accurate source of house price data, highlights this point. Last month, it reported that average house prices were flat in the month to December, with falls of 1.3 per cent over the year.

However, its figures show the massive price differences at a regional level. According to the Land Registry, average house prices rose by 0.8 per cent in London in December, and up 2.8 per cent over the year, while prices fell by 1.9 per cent in the North East, and 7.1 per cent in the year to December.

It even provides a breakdown of figures at a local level. Average prices in Poole, Dorset, saw the highest annual price change in December, rising by 4.3 per cent, while Hartlepool, Co Durham, property prices fell by 17.5 per cent.

Slough, Berkshire, experienced the biggest monthly growth in December, with property prices up by 1.8 per cent, while Blaenau Gwent in South Wales, saw the biggest monthly price decline with a fall of 5.3 per cent.

There is a useful guide to how these indices work on Money Supply blog posts.

What’s your view on house price indices? Which do you discount and which ones do you pay close attention to? Or do they all have their place?

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