Land Registry accused of under-cooking house prices in 'sham' surveys
Wednesday 6th February 2013
The Land Registry has been accused of under-cooking house price figures in ‘sham’ indices.
The accusation comes from the Daily Mail.
It was prompted by claims by the property fund, London Central Portfolio, that more people will have to pay higher rates of Stamp Duty because of rising house prices (see story below).
The LCP press release quoted average Land Registry house price figures at nearly £250,000 – and prompted a flurry of inquiries from disbelieving journalists, who knew that the Land Registry is currently quoting in the region of £162,000.
The answer? While the Land Registry releases free monthly house price indices, these bear little relationship to its bespoke house price reports which it does not publish but produces for paying customers.
The free monthly house price indices, released and treated by the media as official and definitive (well, as official and definitive as the ONS survey, which is yet another story), only include repeat sales data, so do not include properties such as new homes which have only sold once. However, the bespoke reports do include new homes.
Hence, for last year, the Land Registry monthly report put out to the media quotes an average house price for England and Wales of £162,080 while its latest bespoke report tells its special purchasers that the average price is £249,958. In other words, factoring in new-homes prices creates a £87,878 gap.
Obviously, it cannot be right that the Land Registry’s monthly survey is treated as gospel, when perhaps it should be hedged around by all sorts of exclusions, such as ‘no new-homes prices included, and the figures only relate to a sample of the 17m houses that have been sold more than once since 1995’.
However, factoring in new-homes prices does not begin to solve the ongoing discrepancy between the Land Registry and ONS surveys – even though, on the face of it, the Land Registry’s bespoke index £249,958 figure comes close to the latest ONS figures.
Keeping it simple, the ONS does include new-homes prices – but makes it clear that the average price of a new home is less than the average price of a secondhand home, thus dragging down its own overall figure.
So, for November, according to the ONS, the average price of a new home in the UK was £213,000. For a pre-owned house the average price was £233,000 – a long way from the Land Registry's current average price for a pre-owned house of just over £162,000.
So, one of the official house price indices has the price of new homes taking down the headline statistic, and the other has it taking the figure up.
Then there is the fact that the Land Registry monthly prices accord closely with both Nationwide and Halifax monthly data – the key difference being that the latter are based on mortgage data and do not include cash sales. In fact, this morning, Halifax issued its average house price for January which, at £162,932 is very near to the Land Registry's monthly figure, and a very long way off the Land Registry's paid-for reports.
Does price actually matter? Apparently not – according to the Land Registry, when we asked it to comment.
It is not the figures in any survey that count at all, but the direction of travel.
A Land Registry spokesperson told us: “The purpose of a house price index is to measure price change rather than absolute values.”
But isn’t this a bit like going into Tesco and, instead of seeing prices displayed, we merely get told that the contents of our trolley have gone up by an average of 2% since last week but are 1% less than this time a year ago? Meanwhile Asda tells us our trolley is on average 1.5% dearer than last week but 2.2% more than a year ago. It’s not much help when you get to the checkout!
The Land Registry says you can’t compare the different house indices and all have exclusions. But isn’t the ongoing problem that we have two monthly ‘official’ house price indices, based on different methods, and often showing not just different prices but different directions of travel?
No, says the Land Registry, whose spokesperson told us: “Both the Land Registry and the Office for National Statistics produce house price statistics to a high standard. However, there are differences in the data published by each department, due to different sources and methodology used to derive average price.
“The ONS HPI is an important measure of house price inflation for the UK, and together with the Land Registry HPI, they are the main house price indices used by central and local government to support decision-making.”
The Land Registry’s full answer to us is in the next story.
The link to the Daily Mail’s story is here:
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