Can You Trust House Price Index Data?

Can you trust House Price Index stats?

Can you trust House Price Index stats?

A House Price Index… is it worth the paper it’s written on?

It seems that every month the property industry, and the general public, is bombarded with another statistic relating to average house prices. The headlines usually heap a lot of importance on these statistics, either stating that it highlights the impending burst of the “property bubble”, its continued inflation or using it to show people are being priced out of the market.

But each House Price Index uses different measurements and covers different sample sizes, areas and date ranges. Many can indicate a national average property price that varies greatly from the consumers experience.

The following organisations collate their own House Price Index:

  • Rightmove/Zoopla
  • Nationwide/Halifax
  • Land Registry
  • Office National Statistics

I can’t advise which index is the most accurate (if any of them truly are) but I would say that putting faith in any House Price Index would be misplaced. What I will say is that, as the House Price Index can be used to work out the value of a property or dictate what a property is put on the market for, it is shocking that there is not more effort being put into having a standardised dataset.

Change in House Prices between March 2004 – March 2014

Change in House Prices between March 2004 – March 2014

But I don’t think it’s worth just taking my word on it. The table above shows how varied the data collected by each House Price Index can be. Over a 10 year period the Halifax House Price Index has only increased by 17.7% while there has been a 41.3% increase to the Rightmove House Price Index.

The lesson to take away from this is that whenever you hear a House Price Index quoted, before you start to panic or rejoice, remember that it would be wise to take the statistics with a (large) pinch of salt.

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About Christopher Hann
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