On Monday night, Panorama pursued the argument that house prices are in a bubble.
However, the use of ONS figures by Panorama was not explained by the programme, which could equally well have used the much lower, and just as official, Land Registry prices. These come in at around £70,000 less than the ONS.
It is often argued that the Land Registry prices are lower because they do not include new homes. However, as can be seen from the previous story, new homes actually push the ONS average price downwards, not up.
On EAT, we have expressed consistent concern about having two such completely different sets of equally official figures being pumped out.
The danger is that journalists and the Government itself will use whichever data happens to suit their arguments (and, in the case of the Government, their policies) at the time.
In fact, Panorama could – and perhaps should – have explained that there is a real problem with definitive house price data at the moment.
This simple, frequently overlooked fact is recognised by the ONS itself, although it is not exactly flagged up for attention.
The ONS and Land Registry announced in July that they would collaborate in a joint initiative to “consider the development of a single definitive UK house price data”.
However, this week the ONS said: “Whilst good progress has been made, further work is now required…”
We are unlikely to hear more until next year.
Meanwhile, EAT’s reporting on Monday, together with our readers’ somewhat sceptical comments on the LSL/Academetrics (now Acadata) survey, has prompted Acadata to write a special blog for us.
In it, David Thorpe of Acadata defends his own house price survey, describing the Land Registry official figures as “technically interesting”.
His views are in today’s blog section.
Comments
"Mind when rates go up several points I fear for us all !!"
Why? That's what the government, Bank of England and media would have you believe, but the truth is that only one in three adults in this country has an outstanding mortgage on the property they live in. The rest is evenly split between people who own their homes outright and those who rent.
A rise in interest rates would give a boost to pension pots and savers, as well as raising the value of the Pound and lowering the cost of imports.
Those who would suffer are the over-extended, those who bought property expecting capital gains and BTLers. I think they've had plenty of time to get their finances in order and generous policies designed to support them have been holding back the rest of the economy for far too long.
Statto
The different ways of calculating a mean are fascinating to you, me and...........??????
The problem we have is so many organisations want to draw PR from reporting on house prices that the variance (like the stat term?) in methodologies means you have to be pretty switched on to statistical techniques to genuinely understand why they all offer different results.
The fact two Government Departments (each with a Head of Statistics drawn from the Government Statistical Service) have such different answers and don't try to explain why clearly demonstrates that PR is more important than informing the public!
I have no idea what those are IO.
BBC = metropolitan, elitist, hypocritical broadcast media liberals.
I've shat 'em.
When I buy a TV, why should I have to pay the wages of these self-serving drips?
Wet fart Cam (or Patten) haven't the guts to sort them out.
The Panorama programme was possibly one of the worst Panorama's I have ever seen. Poor research, dreadful presentation, lack of credible statistics. Just awful.
'transactions are low because less people can enter the market, because prices are out of sync with wages'?
No. Wages are out of sync with prices!
Whichever is correct succesive governments (right or left) do not want to address either issue from any angle.
House prices must stay high for the feel good factor, wages must stay low to make the UK competeitive in global market.
Removing any artificial prop would go some way to easing the prices (FLS, HTB, emergency low interest rates)
Perhaps restricting immigration might help encourage wage Inflation (I would not advise voting UKIP as they are for reducing workers rights) or
Maybe even going the other way and really adopting EU policy on working hours directive and banning zero hours contracts, has anyone noticed the unemployemnt figure is often mentioned but the full employment figure is never quoted?
@ Polster on 2013-11-13 11:06:32
'transactions are low because less people can enter the market, because prices are out of sync with wages'?
No. Wages are out of sync with prices!
The reason the ONS and LR figures are different is because the basic means of calculating the averages is different. LR uses a geometric mean of prices which is updated via a repeat sales method, whereas the ONS uses an arithmetic mean. The geometric mean is always lower(or equal to) the arithmetic mean for an series of numbers.
This straightforward difference in calculation accounts for much of the discrepancy, and people would do well to read up a bit on the methodology employed in each case before jumping to conclusions about the differences. Maths, innit.
http://en.wikipedia.org/wiki/Inequality_of_arithmetic_and_geometric_means
This information is all freely available.
Agree 100% with rantnrave (always knew the day would come!!) and Polster.
I meant to mention the lunacy that was the 2 bed flat in E17 anfd the 160 (was it?) viewings in a day (or quick look round whilst constantly moving more like) and as an aside is that responsible selling by an agent when clearly it was not needed and 159 people were going to be disappointed? Bit like the London agent that encourages sealed bids.
I digress
What insanity is it that encourages and then enables someone to pay £320K for something marketed at £250K - and will the eventual mortgage valuation say it is worth £320? If it does then either the agent or the surveyor (valuer) is wrong.
I know London is a different market and out here in the sticks life is a bit calmer, but is this typical of what goes on in the smoke?
Polster is also 100% spot on, the lack of reference to and sicussionon interest rates and the impact their inevitable increase will have on the market was shameful, but then this wasn't an economics driven programme (what ever did happen to the excellent Money Programme on Beeb2 Sunday nights?).
There are huge numbers of people out there mainly aged between late 20's and early 40's who are hanging on by their fingertips and who if they keep their job (increased interest rates means slow down in taking on new labour and increase in shedding existing) will struggle to pay even a 1% increase on their mortgage rate, never mind the more likely, over time, 3% to 4%.
Hell many lenders increased their rates late last year anyway without any general excuse for doing so, like a BoE increase.
Sorry for the extended post but with kids in the middle of the target group I identified above this is a subject painfully close to home for me. Mind when rates go up several points I fear for us all !!
No one however can deny that the plight of the couple with kids in Reading who (at current prices) will never own a home to raise their children, is tragic. More tragic is that these people, with all hope of ever having a normal family life, are common place. The positive for these people, is that we are so clearly in bubble territory, that the inevitable interest rate rises (which were barely reported in the programme) will cause a harder more painful correction than if prices had been allowed to continue to slide in 2008. The Housing Minister might want to join the dots and recognise that transactions are low because less people can enter the market, because prices are out of sync with wages.
"The real concern, the real issue only fleetingly mentioned in Panorama was interest rates."
There was a teacher in the programme who was surprised to learn that interest rates were at 300 year-lows. It seems that people really are that ignorant of what's going on around them (unemployment has dropped again today and edging closer to the 7% that the BoE has said it would look at raising interest rates).
The show didn't mention how artificial measures such as the FLS scheme are currently being used to hold back the true market level of interest rates either.
At the start, a viewing was featured on a 2-bed flat in E17 with a guide price of £250k that was apparently sold for £320k. Since bubbles are now measured by transaction numbers this however is no cause for concern...
Still, the BBC is finally reporting that high house prices aren't the best thing since sliced bread. Perhaps they might start featuring what properties they show in Homes Under The Hammer actually sell for, but I doubt it.
The media are either "Property House price crash" or Property House Price Bubble"
The reality is always somewhere in-between.
Take a trip to Hong Kong, Sydney, Vancouver, San Fran or parts of China and you will appreciate that even London is not so expensive for property.
Where you have limited supply and a culture of buying property, over time house prices will go up above inflation. Particularly in major capital cities of the world.
BBC & Robert Peston have never called the housing market correctly so intend to be really prompt in predicting its demise this time.
Prices are recovering but without supply, volume levels wont. Prices will of course increase, but developers confidence will renew and more schemes will be built compounded by availability of funding.
If the Government reviewed the insane SDLT thresholds and instead buyers paid a higher rate for the amount above the threshold, then price increases would be more gradual and not jump so quickly. Add in a revision of the onerous 106 requirements, and the green shoots of stability could emerge.
Just my view, but I dont see how poorly researched tabloid like TV will have any influence whatsoever.
Vendors are driven by aspiration and expectation - Rightmoves claims of increases have more influence than Robert Peston.
The BBC think because a bloke can take a fee for helping them all move to manchester he must be an expert. Compared with anyone at the BBC I suppose he is.
Sadly the reality that their expert is a self appointed one who knows enough stuff to blag his way through a dinner party but thats where his expertness stops.
The mighty BBC don't like anyone to point out their factual inaccuracies and have a team of arrogant attitude, euber medical centre receptionist.... (fill in your own word, 2 hours with Roget's and I can't find a polite word to replace the one I want to use) to bury any complaints made to them.
As soon as David Attenborough gives up making telly programs the better, any justification for the BBC will finally cease.
The real concern, the real issue only fleetingly mentioned in Panorama was interest rates.
As unemployment continues to fall there is increased comment that discussions in high places i.e. round the BoE boardroom table are already taking place and that interest rates are going to gradually be increased sooner rather than later.
Ss I and many others have been saying for about two years, we ain't seen nothing yet. As in July 1988 buying a property in about 3-6 months time could be the worst decision many first time buyers ever take with the Help to Buy Scheme since as in 1988 prices will correct at least 15% - 20% as and when interest rates do rise.
And forces sales and possession sales hit the market 6 - 9 months later.
It is increased interest rates that are the real danger and likely to make prices fall, not some fancy toe in the water Govt scheme.
BBC = Left wing, ignore them if you want a balanced view.