At least five indices are used to measure the price of homes
However, what is the best index of home prices?
It should come as no surprise that Britain, a country obsessed with real estate, has at least five primary indices that gauge home values.
Every month, data reports detailing the fluctuations in home values nationwide are produced by Nationwide, Halifax, the Office for National Statistics (ONS), Zoopla, and Rightmove. These reports are eagerly anticipated by home buyers and sellers. However, they all come to somewhat different conclusions about the housing market's current state, which can cause some confusion.
In this section, we examine the differences between the property indices, what each one measures, and the best house price index.
Index of national home prices.
One of the most widely used indices in the UK is the Nationwide House Price Index, which has been around since 1952.
The lender's valuation at the mortgage-approval stage serves as the data source. This may not match the sale price, but the idea is that it is close enough to the end of the house-selling process to provide a more accurate picture than the asking prices at the beginning.
Since the index is mix-adjusted, it assigns a relative weight to each property based on factors like the number of bedrooms, allowing it to track a representative home. This keeps price differences from developing if different kinds of properties are sold on a monthly basis.
According to the most recent data from Nationwide, house prices decreased 0.6 percent in April compared to the previous month. In April, the yearly rate of increase in home prices dropped from 3point 9 percent in March to 3point 4 percent. Today, the average cost of a home in the UK is 270,752.
Halifax Home Price Index.
The Halifax house price index, like the Nationwide index, is based on the banks' valuation at the mortgage-approval stage and includes data dating back to 1983. With this information, a standardized home price is determined, and like-for-like changes in real estate prices are examined over time.
Halifax reports that the most recent data shows that house prices rose by 0.3 percent in April and 3 0.2 percent annually. The average price of a home in the UK is currently 297,781.
Index of home prices from Rightmove.
Rightmove's house price index is based on asking prices, which sets it apart from Halifax and Nationwide. At the very beginning of the home-buying process, the asking price is typically decided. Inner London is not included in the index either.
The use of asking prices has the evident benefit of identifying price trends early. However, the asking price and the final sale price of a home can diverge significantly.
According to Prestwich and London estate agent Petty Son, one of the primary problems with the Rightmove index is that it reflects market sentiment rather than reliable data. Additionally, there is no assurance that a house that is listed will sell.
In spite of this, the house price report provides valuable information about discounts and the speed at which properties are being offered, providing a solid indication of the state of the real estate market.
According to recent data from Rightmove, asking prices rose by 0.6 percent as a monthly average in April and 1.2 percent as an annual average. Comparing this period to the same period last year, there were 14% more new properties coming to the market.
House price index from the ONS/Land Registry.
HM Land Registry, Land and Property Services Northern Ireland, and Registers of Scotland provide the sale data used by the Office for National Statistics to determine official house price figures each month. The most reliable indicator of home prices is this one.
Hedonic regression is a statistical technique used by the ONS index to modify the data in order to take into consideration factors such as the number of bedrooms.
The ONS data includes cash purchases as well, in contrast to the Halifax and Nationwide indices, which are based on mortgage approvals. A wider perspective of the market is thus provided.
The index's two-month time lag is a drawback because it takes some time for conveyancers' submissions to the Land Registry to be processed following a sale.
According to recent ONS data, property prices in February were unchanged from the previous month and are 5 points higher than they were a year ago. The average cost of a home in the UK is currently 268,319 pounds.
The Zoopla house price index.
Each month's house prices are determined by the Zoopla house price index using information on agreed sales, mortgage valuations, and sold prices. Stated differently, it tracks achieved prices, which is a significant distinction from an index of asking prices. Because asking prices frequently do not correspond to sale prices, tracking homes that are "sold subject to contract" is a better way to gauge current home values.
Additionally, the index gives information on the days it takes to sell a home, which helps potential sellers estimate how long it will take for their property to sell. The time between the first listing and going under offer is measured by this.
Unfortunately, the Zooplas index depends on a small pool of data with a certain amount of latency, just like every other index on this list.
The average price of a home rose 11.6 percent in the year ending in March, according to the most recent data from Zoopla. There are 6% more agreed sales and 12% more homes for sale, indicating a 1% increase in buyer demand over the previous year.
RICS's UK Residential Market Study.
All of the other indicators on this list are significantly different from the UK Residential Market Survey conducted by the Royal Institute of Chartered Surveyors (RICS). Every month, chartered surveyors who work in the residential real estate and rental property markets participate in this sentiment survey.
The percentage of surveyors who report rising or falling home prices is measured. It is an indicator of the state of the UK residential sales and rental markets both now and in the future, even though it does not give an average house price for a given month.
In order to report whether these metrics have increased, stayed the same, or decreased, surveyors are asked 18 questions about a variety of metrics, including sales, inquiries, listings, and home prices.
A strong housing market is indicated by a positive net balance, which shows that more surveyors are noticing price increases. A negative net balance, on the other hand, indicates that the housing market is more fragile and that more surveyors are seeing price declines.
As an example, the net balance would be -5 percent if 15 percent of surveyors reported a rise in buyer inquiries and 20 percent reported a fall.
According to the most recent data from RICS, a net balance of -3 percent of respondents in April stated that home prices had gone up over the previous three months, compared to +2 percent the previous month.
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