Are house prices going up in all areas of the country?

20 August 2013

"House prices are rising in all regions of the country, not just London." 

The Daily Telegraph, 18th August 2013

"London prices up 8%... but North struggles"

The Sun, 20th August 2013

In a week where more 'green shoots' were reported to be showing for the UK's economic recovery, today the housing market took a bow - at least in parts of the press.

The Telegraph reported that house prices rose across all regions of the country in July, claiming it showed the housing market was 'turning a corner' on the road to recovery.

The data, from the Royal Institution of Chartered Surveyors (RICS), shows the West Midlands and North East England reporting "their highest levels of interest amongst buyers for 14 years".

Yet other articles lamented the stark 'North-South divide' using figures recently published by the Office for National Statistics (ONS), showing that although prices in London have risen by 8.1% there are several areas of the country where property prices have flat-lined or fallen. Property in the South West has remained constant, while houses in Scotland, Northern Ireland and Yorkshire and the Humber have seen a drop in their value.

Explaining the disparity, as we might expect, comes from looking at how the two bodies go about measuring house prices.

There's no single definitive source for UK house prices. Instead, we have to rely on several different models which use varying methods.

The ONS house price index - reported in the Sun - uses a sample of completed mortgages collected by the Council of Mortgage Lenders to compile its prices:

Meanwhile the June 2013 RICS data - reported in the Telegraph - is based on a survey of property surveyors whose role is to value what a property is worth:

So we can expect some differences simply because one is based on actual completed mortgages and the other is based on surveyors' sentiment.

Just another difference is that the RICS figures referenced show month-on-month changes in house prices, whereas the ONS figures reflect year-on-year shifts. So the RICS data is based on a shorter time period so can tend to be more volatile, whereas the ONS data shows a medium term trend in the housing market.

In any case, using one period's worth of house price change to judge the pace of economic recovery is a limited method. Differences between the different house price measures tend to iron out to an extent over time, and we can see from RICS's data that Yorkshire and Humber hasn't quite gone into positive territory yet. While this data is certainly encouraging for householders, it might be a little premature to say that all regions have seen gains, at least in the longer term.

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