A review into house price indices is well overdue, argues Phil Whitehouse, head of The Mortgage Alliance (TMA)
I wrote an article not too long ago something along the lines of just how baffling the sheer number and variety of house price indices, research, reviews and reports can be. Frankly I was worried, and still am for that matter, on how influenced a potential borrower may be when bombarded with various degrees of percentage falls or rises. Would a decent sized headline in a national paper indicating that house prices are falling really have that much of an effect on someone toying with the idea of buying or selling a property? I can’t tell you the definitive answer but my gut reaction is that it could well make quite a few put any forward momentum on hold at least until the next positive headline. However, without pointing the finger too much at the national press its worth asking the question do such stories fully evaluate the statistics in terms of outside influences such as seasonal variances, political instability or even major events such as the World Cup? They may do but much further down the story than may read to.
Of course these studies also have varying degrees of criteria of which the results are based which inevitably means that some are more up-to-date than others yet this is generally not explained to the reader. I mean how many people actually have any idea what specific part of the house buying/selling process each of these indices are based upon? In terms of the consumer I would hazard a guess at next to none. Of course that’s not to say that these indices are in anyway incorrect but headlines involving house prices are certainly picked up pretty swiftly by news outlets as UK consumers continue to follow these trends with a great degree of interest.
I’m bringing this up again because it was with great interest that I saw a news story which said that the Government has launched a review of the various house price indices available because of the ‘confusion’ they may cause. Now I did a very quick search on this on, and was unsurprised to find that not very many news outlets carried this story outside of the trade press. This was even more evident when compared to a recent RICS survey which suggested that house prices would drop for two years, according to one headline. On a very quick unscientific search this latter story outnumbered the former by a conservative estimate of 35 to 1. Again I’m not pointing the finger at RICS but it just highlights the exposure attached to house prices.
So not surprisingly I’m in favour of the news that the The National Statistician – the Government’s principal adviser on official statistics – is investigating the ‘coherence and comparability’ of house price indices after a number of people confessed being confused by the data. Concerns that different methods for calculating house prices are confusing buyers and homeowners has prompted the government to review its two major house prices indices produced by Communities and Local Government and the Land Registry. The review will initially focus on house price indices published by the government which should be completed by the end of this year. The review will then consider house price statistics more broadly to see how useful they are to the public. The review is not said to a response to problems reported by either of the main government indices.
The current housing market is currently tough enough for potential borrowers without any additional layer of confusion or doubt. A review such as this may help simplify matters and give rise to less sensationalised headlines but then again I won’t be holding my breath. House prices will continue to be big news for the foreseeable future as I’m sure there are still many ups and downs to come.
