Legendary mortgage broker Ray Boulger has hit out at the ‘farce’ of seasonally adjusted house prices in surveys from the likes of Nationwide and Halifax.
Boulger, of John Charcol, said the Nationwide and Halifax reports distort the market through the ‘nonsense’ of being seasonally adjusted.
He hit out just before the latest survey was published this morning – the LSL Academetrics report, which says it is “derived from Land Registry house price data, seasonally and mix adjusted by property type … The prices are smoothed to show underlying trends.”
But Boulger said: “The way providers of house price indices seasonally adjust their figures is a farce (or, seasonally adjusted, a comedy).
“In many months the seasonal adjustment skews the real figures so much the result is that the comment generated is often misleading.
“To help restore confidence in all UK house price statistics, not just those from Nationwide and Halifax, I suggest all providers should give at least as much prominence to the real figures as they do to the seasonally adjusted ones.”
He added: “For example, anyone who has seen some of the very bearish comments following publication of Halifax’s May House Price Index this week, could be forgiven for not realising that in the first five months of this year, the real, ie non-seasonally adjusted, Halifax house price index has actually recorded a small rise of 0.5%.
“In the same period the Nationwide real house price index recorded a rise of 3.1%.”
The Government is meant to have been conducting a long-overdue review of its own house price surveys – from CLG and the Land Registry – although it could take in other surveys as well.
However, the report should have been completed at the end of last year, and nothing has been heard of it since, as the seasons have passed through winter to spring and now summer.
Boulger called for the Government to publish ‘real’ figures alongside seasonally adjusted ones.
He said: “Whilst it is true that activity in the housing market tends to be seasonal, this doesn’t automatically mean that prices are impacted by the seasons.”
A spokesman for Nationwide said: “We think prices are seasonal. To look at individual months would not give the full picture.”
Today’s LSL Acadametrics house price survey claimed that house prices increased by an average of £20 between the end of April and end of May, to stand at £223,971. The survey gives notoriously higher figures than either Halifax or Nationwide – or, more confusingly, the Land Registry, from which it draws its data.
The Land Registry’s latest average house price figure for England and Wales, in April, stands at £163,083. The Land Registry’s monthly reports also, quote, “standardised seasonally adjusted prices”.
Your views, as always, are particularly welcome.
%20-%20IMAGE%20Client%20Accounting%20%E2%80%93%20what%20are%20your%20options.jpg)
Comments
RE taf "Who said the Land Registry figures don't include properties sold at auction? I'm pretty sure they do."
They don't unfortunately.
Everyone goes on about land registry figures being accurate but they are highly distorted them selves.
Gift deposit fraud during the housing bubble drove up not only those gift deposit properties but the ones around them too. Now we have shared equity with shared ownership which is distorting prices as well. With the low transaction levels and need for larger deposits these scam schemes are still popular hiding the true falls on land registry figures.
Taff, I may well stand corrected (?) but i'm sure auctions are considered to be commercial transactions:
http://www.landregistry.gov.uk/
The Land Registry HPI is derived from all residential property transactions registered with Land Registry since January 1995, with the following exclusions:
all commercial transactions
transfers,
conveyances, assignments or leases at a premium with nominal rent which are
'right to buy' sales at a discount
subject to a lease
subject to an existing mortgage
to effect the sale of a share in a property
by way of a gift
by way of exchange
under a compulsory purchase order
under a court order
to Trustees
vesting deeds
transmissions or assents of more than one property
leases for seven years or less
Ray Boulger is a mortgage broker, his business is selling mortgages. Mortgage transactions are down, house prices are falling and his business colleagues are losing money.
It is in his interest to complain against negative figures as it is in his interest for a return to irresponsible lending as he keeps crying out for a return.
He is a vested interest and his opinions should have that taken into account. I for one don't mind seasonal adjustment as long as it follows the whole year and the method is consistent if prices rise or fall.
This is a complete none issue for some failed broker screaming for media publicity.
Who said the Land Registry figures don't include properties sold at auction? I'm pretty sure they do.
Mate... hair gel... in the Midlands? Mon Dieu - whatever next...!
As long as it doesn't get as far as Hadrian's Wall I'll be a happy bunny! ;o)
Well PeeBee, my hair's too short for hair gel but let's say i'll consider this my third home...
Sibley's... - mon ami! Have you decided to cross over to the 'dark side'...?
Welcome, brother! I knew you would eventually... ;o)
Jonnie, it's true, the Land Registry (amongst other sales) do not include Auction sales in their figures.
Garth, yes that used to bother me as well but - as another poster explained other t'other side - there is logic in this (the main driver to smooth out huge discrepancies in sales prices).
It must be remembered that the LR compare apples with apples insomuch that if 123 Acacia Drive sold last month they would look for and compare the previous sale price of that property only. Sure, if they included Auctions it would initally show (no doubt) a massive drop but remember that works both ways - the next time that formerly auctioned property sold it would invariably show a massive rise.
Nice to see some agreement amongst people on here regarding indexes. Let's remember that Halifax and Nationwide issue them each month to get their name's in the newspaper. Good marketing for them. I was interested to read Richard who said that the seasonal adjustment is +/- 1.5%. As the monthly changes are often less than this, it does seem a little pointless.
In regard to people saying that no fuss was made when the prices were going up. That is not entirely true. No agent likes seeing prices move rapidly as it makes it harder to give good advice. I remember sitting in front of vendors 8 years ago telling them the house had not sold because it was too much. The reply was that prices had gone up so there price should go up!
@Garth
I guess that if the lenders that publish an index have provided the mortgage for an auction property it will be in there and as auction properties are registered with Land Registry they are likely to appear there as I do not believe either lenders or Land Reg indentify / pick out auction sales.
Add this to the fact that auctions make up a tiny percentage of sales overall means I do not see why you consider it a farce?
Jonnie
The only farce is that house price indices exclude properties sold at auction? Wonder why that is......
I made this point to our old mate rantnrave months ago! House prices do not REQUIRE to be "seasonally adjusted" - the seasons do it for us already!
If 27 Acacia Avenue sells in December for £150,000, then that's what the price is - nothing more; nothing less. Whether or not it would sell for a bit more (or less for that matter...) with some leaves on the trees is irrelevant.
Of course, the main problem with ALL these stats, is that they are without exception historical. Sales made weeks or even months prior to being recorded.
THAT is why, folks, ONLY an Agent can really tell you what is current. They work the patch every day.
Over to the Hendrys and militant HPCers of the world to spit venom at that last paragraph... ;o)
Is this the same Ray Boulger that was removed from the FSA listings, so is currently unqualified to give mortgage advice?
mmm, didn't hear him moaning during the great complicit con "glory years" of 2000-2007, and the recent 2009-2010 dead cat bounce.
Over on HPC we've been moaning about the national average indexes for many moons. There'ye only purpose is [or should I say was] to give the Daily Mail & Express readers some sort of false comfort in their senior years; propaganda.
However, I see sites like Zoopla with their local postcode Zed-Indexes providing a more accurate local drill down, based on local statistics, allowing us to track drops where we're interested.
Ha very true Hampshire Agent, conversely I find YoY to be highly reliable. Of course, +ve results can easily be rationalised away...
Jonnie's right though, the question should be asked why one of the press' most prominent bullish commentators is kicking-up such a fuss now. The clue is in the VI.
I think the lot of us are going to get a mild slapping from our HPC mates on this, and possibly quite rightly so.
No one in the industry stood up and highlighted deficiencies in the indexes when they were just happy news for homeowners did they?
Boulger is of course right and they are a muddled nonsense but his timing is off, about 3 years off
Jonnie
If seasonally adjusted figures showed a small rise when the market is falling - there would be deafening silence.
The only way house prices can increase is by an expansion of debt.
Let us not forget:
Debt is good, more debt is better.
Good points by Ray. The statistics are unhelpfull - unless they're showing YoY increases.
ESPC which covers East Central Scotland publishes a monthly report on Edinburgh, Lothians and Fife. We do not seasonally adjust our figures for these reasons. Plus we focus more on year on year data (rather than month on month or quarvter on quarter) so that seasonal influences take care of themselves. Also, it is straightforward.
Forget 'seasonably adjusted' the whole concept of 'average price' is pretty meaningless as a comparison tool in the context of the current Market. This is because volumes of sales have fallen overall but disproportionately at the lower end of the Market. The affect of this is to keep average prices high masking the fact that 'like for like prices' may have fallen. It is only by looking at 'like for like' comparisons that we can get a feel for what is going on and then only if our conclusions are tempered by other demographic factors.
Halifax use "The standardised index is seasonally adjusted using the U.S. Bureau of the Census XII moving-average method based on a rolling 84-month series."
So that's clear then.
Nationwide, perhaps more prudently appreciating that their audience is unlikely to be composed of qualified statisticians, simply state: "The seasonal effect is estimated each month using established statistical methods".
Ah, so therefore we all know how to interpret the numbers.
Trouble is to my mind, seasonal trends seem to have flown out the window in recent times & economic factors, big events & unseasonal weather almost certainly have more influence.
Nationwide says the seasonal effect is +/- 1.5% so why unreliably skew a figure of say 0.5% by adding or subtracting a number that is, at best, based on outdated factors & at worst, utter codswallop.
I'm with Ray on this.
Good comment from Ray. the statistics are a farce. They also do not give any margin of their error. ie. If you are adjusting the figures there has to be some margin of error, which I am sure is probably larger than some of the percentage changes they give each month.