What the Land Registry says:
“The difference between our HPI and the ONS figures arises because they use different data sets and methodologies and inevitably throw up different results. Land Registry is committed to working with ONS to implement the recommendations from the National Statistician’s Review into House Price Reports conducted in 2010.
The difference also applies to our HPI and Standard Reports referred to by the Daily Mail which use different methodologies. The key point is that there is no house price report currently that covers absolutely all property sales; all have particular exclusions.
Land Registry offers a range of house price information which is based on our 'Price Paid Dataset'. This is a record of all residential property transactions made for full market value in England and Wales since January 1995 and contains details on over 17 million sales. The information we offer includes the House Price Index (monthly/free) and Standard Reports (bespoke/chargeable) referred to in the Daily Mail article.
The HPI is a quality-adjusted price index whereas the numbers shown in our Standard Reports represent the arithmetic mean (simple average) of properties sold within a given time frame for a defined area. Both are derived from our price paid dataset; however there are differences in how each report is calculated. This means that the information in the reports cannot be directly compared; trying to do so does not provide useful or meaningful information. The purpose of a house price index is to measure price change rather than absolute values.
It might be helpful if I explain some of the historic background.
From 1995 to 2006 we produced Residential Property Price Reports free on a quarterly basis which offered a PDF detailing averages at regional/county/unitary authority/metropolitan district and London borough level.
Standard Reports have been available since 1998 as a chargeable service. They offer bespoke excel spreadsheets available for specified geographical areas from postcode sector level upwards.
In 2006, due to customer feedback on the quarterly reports, we decided to move towards a more timely and statistically sophisticated and balanced calculation method and replaced them with the free monthly House Price Index.
Despite the introduction of the HPI in 2006, again based on customer feedback, we decided to keep the chargeable service where customers could request information on a specific geographical area, for example at local authority level where it was not available from the HPI.”
https://www.landregistry.gov.uk/public/faqs/different-types-of-house-price-information
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Comments
"The key point is that there is no house price report currently that covers absolutely all property sales; all have particular exclusions."
Furthermore HPI reports fail to account for the number of sales which end up falling through, which if recent reports are anything to go by is as many as one in five. (source: http://www.quickmovenow.com/blog/2013/02/quick-move-now-house-sale-fall-through-index-q4-2012/)
My advice; take all HPI data with a large pinch of salt...