Why house prices need better measurement

5 April 2012

The issue of housing costs is a topic that has kept Full Fact busy over the years.

Most recently, we looked at whether private housing rents were rising or falling - finding that several different measurements from different organisations complicate matters hugely. 

So imagine the reader's confusion when Sky News last week reported:

"House Prices Fall At Fastest Pace In Two Years"

And the Daily Express today reported:


The different reports were again the result of different indices being used. Sky News reported the findings of the latest survey by Nationwide. Meanwhile, the Daily Express used the latest Halifax house price index findings.

Looking back over several decades, these two indices have tended to show broadly the same trends. Month on month, however, there are frequently differences between the two.

March 2012 was just such a case. The Nationwide Index showed a 1 per cent fall on the previous month. The Halifax Index, however, showed a 2.2 rise on February 2012.

The indices are different simply due to different samples - the Nationwide Index is drawn from Nationwide's own mortgage lending data and likewise with Halifax. Both are seasonally adjusted - in other words, they are altered to stop routine seasonal price shifts affecting the monthly trends.

Both news outlets used the indices to make statements about house prices in the UK as a whole. While they both reported the figures accurately, readers can easily be left confused having seen conflicting messages.

The confusion is even more understandable when the news outlets themselves report different indices at different times of the year. The Daily Express, who today used the Halifax Index, used the Nationwide Index in December last year.

Moreover, choosing whether to report annual or monthly changes can also cause confusion. In December, The Express used the Nationwide Index to report an annual rise (+1 per cent), in spite of a monthly fall (-0.3 per cent) at the time. Today, they used the Halifax Index to report a monthly rise (+2.2 per cent), in spite of an annual fall (-0.6 per cent).

Inconsistency in reporting is a serious issue, but the confusion caused by these two indices alone highlights a wider point. The Government still use two different measures of house prices themselves - one compiled by the Land Registry and the other by the Department for Communities and Local Government.

So when even the official data available to us is conflicted, there appears to be little hope that the confusion caused by the snapshots given to us by the various measures put together by financial institutions will be removed.

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