Personal Finance News

AN ENGLISHMAN'S home is his castle. And an Englishwoman's I daresay. I have always wondered as to why the saying has yet to apply to a Scotsman…or a Welshman….or woman. But while this may be one to ponder (without being aware of the etymology of the observation, I would hazard a guess at ye olde saying being coined at a time when home ownership was an option only available to a privileged few landed gentry and the like), no-one can be in any doubt as to our great passion for home ownership this past quarter century or so.

And of course it is house prices - whether they are going up, down, sideways or whatever - rather than the mere fact of owning a property, which has been the all-consuming debate for anyone with their name on a deeds document.

We can all be forgiven for not knowing how we stand with the true value of our homes. The old adage has it that it is what a prospective buyer is prepared to pay, but there do of course have to be guidelines. How much Mrs Jones' property over the road - which is identical to ours more or less etc - went for when she finally completed the other week. Well now you can actually find this out. There are a whole plethora of websites that link to the Land Registry and record what has actually been paid for properties around you. Simply go to www.ourproperty.co.uk, www.myhouseprice.co.uk or www.mouseprice.co.uk, type in your post code and these sites will return details of recent property transactions.

Estate agents will give professional valuations based on a variety of local data, taking into account the values of similar properties in the area, and reflecting notional house price surveys and indices. But this, as anyone who has read conflicting newspaper reports over the past 12 months or so, is an imperfect science.

Every week, new house price information is published from one source or another. The Financial Times recently got in on the act with its own house price index, but worryingly, these different sources of information seemingly contradict each other. Last month's Rightmove house price index reported a house price fall, while rival index Hometrack nodded to stable prices and the major national indices from Halifax Bank and Nationwide Building Society bet on modestly falling prices.

According to a spokesperson for the Hometrack index, we are being subjected to this perplexing 'who to believe' stream of information because individual indices each look at a snapshot of price information at different points in the house buying process. So for example, Rightmove.co.uk, the property website, puts together its house price index on the basis of asking prices published on its website. "While asking prices will not always match the actual price achieved exactly, movements in asking prices are a very good forward indicator of actual house prices agreed," argues the spokesman. Then we skip to say four weeks after the asking price is set, and an agreed offer is made. And this is the information that the Hometrack price index is based on, via a survey of more than 4,000 estate agents nationwide.

If you can bear with me, typically, another four weeks after this, the buyers' mortgage is approved. And this, according to our Hometrack spokeman, is when both the Halifax and Nationwide build their own house price indices. "Yet another four weeks after this, the mortgage completion takes place, and prices recorded here form the basis of the Office of the Deputy Prime Minister's own house price index," he adds, just in case we were not confused enough already.

And let's not forget the other 'important' index of house prices, the Land Registry, which reflects the price of a property around six weeks after the mortgage completion when the transaction is put onto the registry.

So, incredibly, what we have is a period of around six months between the time the asking price is set (see the Rightmove house price index) and the housing transaction is registered (Land Registry house price index). It's no wonder we are getting conflicting information.

But, as a former Daily Express editor of mine used to say to me on a Friday afternoon, mindful that sales of the paper were often down on Saturdays….'what are house prices doing at the moment, David…are they going up…or down?'

A quick chat to whichever housing analyst was currently in favour later, and I would report back, gravely if it was a negative, and with a beaming smile if prices were on the way up. But I could pretty much guarantee that my name would be on the 'splash' - the front page story - the next day if we could say HOUSE PRICES TO FALL BY 10 PER CENT. Or something like that. A guaranteed circulation booster.

And, back in the real world, it is looking like the Bank of England base rate will be steadily cut over the coming 12 months to help lift consumer and manufacturing gloom. Many analysts predict a low base rate of 3.75 per cent by this time next year. And I predict a steady rise in property values. But don't quote me.

Moneynet Guide to the Property Price Websites


Land Registry

This quarterly survey is the most comprehensive of the lot, and is widely considered to be the most authoritative.

The proceeds of all property sales in England and Wales are totted up and then divided by the total number of sales to reach an average sale price. Because it takes virtually all residential property sales into account - except repossessions and property transfers following a divorce - the Land Registry's figures can provide a unique insight into not only national but local prices.


Government price survey

The government has its own monthly house price index, issued by the Office of the Deputy Prime Minister (ODPM), which uses lending information from about fifty lenders collected through the Survey of Mortgage Lenders.

Unlike the Land Registry survey the new government index does not contain information on cash purchases, which account for about a quarter of the market.

And unlike the Nationwide and Halifax surveys, which are weighted according to transactions, this survey depends much more on the total amount of money spent. Relying on expenditure in this way will mean that London and the South East, where house prices are highest, will have a greater influence on the government's index.


Nationwide and Halifax

Perhaps the best known snapshots of the property market are provided by Britain's two biggest mortgage lenders, Nationwide and Halifax. Both surveys cover the entire UK, rather than just England and Wales.

Their figures are often very similar, as they are both based on the price agreed after a survey by their mortgage customers. However, like the new government survey, they are based only on property sales financed by mortgage lending, ignoring sales which are transacted on a cash basis.


Royal Institution of Chartered Surveyors (RICS)

Put simply, this survey reflects confidence in the property market rather than what is actually happening to house prices.

Three hundred surveyors and estate agents in England & Wales are asked if they feel prices are on the way up or down and are quizzed on a host of other related issues, such as whether the number of buyers and sellers are rising or falling.

Generally speaking, the RICS survey is the first to show any sea change in the market.


Hometrack and Rightmove

Hometrack was first in on the act in 1999, and has established its survey as a very useful guide to current prices. Data is collected from 3,500 estate agent offices from all 2,200 postcode districts in England and Wales. The estate agents report whether asking prices are rising or falling.

Rightmove's survey operates in a completely different way to the Hometrack survey, collating asking prices for houses placed on its own website over the previous month. The sample size is quite extensive, as Rightmove claims to display around 35% of all homes for sale. Over half the UK's largest estate agency chains choose to list their properties on its site. However, it obviously does not reflect the prices at which properties actually sell.