In such volatile times for both the housing market and the general economy, nervous homeowners and would-be first-timers have good reason to monitor the direction of property prices as they confront the possibility of negative equity or try to plot the right moment to buy or sell. But if they looked at last month's two major indices for bricks and mortar, their uncertainty will only have increased, as the figures told completely conflicting stories.
In December, Nationwide building society reported a fall in the average house price of 0.5 per cent, while the Halifax pointed to a rise of 1.3 per cent, despite having reported declines for the three months before that. So how does this all add up?
"A few monthly falls and then a sporadic rise is quite typical when the housing market becomes subdued," says Martin Ellis, chief economist at the Halifax. "Even in the early-1990s recession there was the odd monthly rise in house prices. No pattern occurs in a smooth, straight line."
This may be true, but opposing figures from Nationwide and the Halifax are made more confusing since both use the same criteria to assess price movements.
Each lender takes an average of property valuations at the point at which a mortgage offer is made. Homes across the whole of the UK are considered in the figures, which are also adjusted for changes in activity between the seasons and to filter out "micro markets" that could skew the overall picture, such as a high number of multimillion-pound homes sold in the capital.
Ray Boulger, senior technical manager at mortgage broker John Charcol, says that given this uniformity of approach, the inconsistency in the December figures is hard to explain. "It could be that the Halifax is quicker to produce the mortgage offer as more applications are received online – or just that Halifax and Nationwide publish their housing reports a week apart, which will have an impact on the data collected."
There are other indices for consumers to choose from, although these could open a different can of worms. Data from the Land Registry, for example, could be seen as the most accurate as it refers to completions – what a property actually sells for rather than the initial valuation. But the index considers homes sold only in England and Wales. "This means that the staggering 50 per cent rises seen in some parts of Northern Ireland last year are not counted," says Mr Boulger.
Peter Bolton-King, chief executive of the National Association of Estate Agents (NAEA), adds that by the time the sale price is recorded with the Land Registry, it can be some months old, so published figures aren't a "snapshot" of the current market. "For what's happening right now, you would have to use the figures from Rics [the Royal Institution of Chartered Surveyors] or the NAEA, which are based on the experience of the members of the associations. The downside is that these are not based on physical data but a 'feeling on the ground'. The December figures from Rics – unlike those from the Halifax – were gloomy, with 49.1 per cent more surveyors reporting a fall than a rise in prices."
Other indices muddy the waters further. Online service Hometrack, for example, refers to offers made on property, while the Rightmove index refers to asking prices. Data from the Department for Communities and Local Government is based on completions figures from 60 mortgage lenders – but the most recent publication shows data for November only.
As house price indices are far from an exact science, consumers should use them only as a guide, says Mr Bolton-King. "In their own way, they are all reliable; they are just measuring different things at different times. Even Nationwide and the Halifax do not account for property that does not require a mortgage and can reflect a bias in certain areas of the country.
"But none of the indices is wrong so it's not a 'pinch of salt' that's needed – just a very general overview."Reuse content