博鱼体育集团

Buyers and sellers were recently reminded of the dangers of over-analysing house price data.

Six days after Nationwide announced a UK decline of 3% in the year to March, Halifax reported a rise of 1.6%.

It was the biggest divergence since 2019 and provoked understandable confusion.

Rather than expose a major difference in how the two lenders crunch their numbers, it demonstrates why house price indices themselves should be handled with care.

An index is only as good as its raw data, so recent market conditions, where sales volumes have been low and mortgage volatility high, are not an ideal starting point.

Nationwide doesn鈥檛 include buy-to-let transactions and the models used to adjust for property characteristics, seasonality and location are unique, so inevitably there will be differences.

However, if you are looking for the reason behind last month鈥檚 discrepancy, September鈥檚 mini-Budget is a good place to start.

鈥淚ndices are susceptible to fluctuate as sample sizes become constricted,鈥� said Dr James Culley, the data science lead at 博鱼体育集团 Frank residential research. 鈥淥n top of that, the uncertain lending environment will have made indexes that contain a valuation element more subjective in recent months. The divergence has shown the effect that even small sample or methodological differences can have, and it will take more time for the full picture to emerge.鈥�

Even under normal circumstances, house price indices have their limitations.

Both indices, as well as the more complete but lagging ONS index, are a useful proxy for the overall state of the housing market but little more.

To underline the point, the ONS, which uses Land Registry data, found UK prices rose 6.3% in the year to January. Meanwhile, the latest report from e.surv Acadata, whose model is based on Land Registry completed sales data, showed a provisional 3.6% rise in the year to March across England and Wales.

The truth is that there are tens of thousands of individual housing markets across the UK, each with their own supply and demand dynamics. As a result, a national index will not necessarily tell you much about what is happening on your street.

鈥淓ven regional indices can disguise huge differences among local markets,鈥� said Dr Culley.

There is a clue in Nationwide鈥檚 methodology statement. 鈥淲e use a set of characteristics that describes the 鈥榯ypical鈥� UK house in order to track the value of a typical UK property over time. This typical house does not physically exist.鈥�

To draw an analogy, a small businessowner can study the latest GDP numbers, but it won鈥檛 necessarily tell them whether their own revenue will rise or fall.

It is also worth pointing out that neither index from the two lenders includes cash sales, which will alter the picture further.

Savings accumulated during successive lockdowns have accelerated mortgage repayments in recent years, according to Toscafund chief economist Savvas Savouri. He estimates that around 10 million homes in the UK are owned outright compared to 6.1 million mortgaged properties.

The proportion of mortgaged homes fell to 26% from 32% over the last decade, while the number of debt-free properties has risen to 38% from 31%. It means drawing conclusions about the impact of higher borrowing costs are not completely straightforward.

Despite the numerous caveats, house price indices can be a useful tool, particularly from a macro perspective. Just as long as you remember that every property is unique and shocks like the mini-Budget can skew the numbers.

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