A new UK house price index has just been published which will replace separate indices published by the Land Registry and Office for National Statistics. It is the result of a joint collaboration between the Land Registry, Office for National Statistics, Registers of Scotland, Land & Property Services - Northern Ireland and the Valuations Office Agency.
For now this new index has been published as an experimental official statistic to allow further development work to take place. By the end of 2016, this index is expected to be recognised as a National statistic and be known as the official UK House Price Index or UK HPI for short.
The new methodology uses a different way to calculate average prices which makes it less likely to be skewed by extremes in the market. Along with data on actual transactions, the new index also enlists property attributes data such as type, floor area, number of bedrooms and location of the property along with other demographic profiling data. Combining these datasets with the transaction information provides a more robust dataset for the regression analysis to account for the changing profile of transactions over time. The index claims a more complete coverage of the market by including cash sales and new build transactions but excluding transactions at below full market price (such as right to buy or remortgages for example).
Each month there will be a UK monthly summary report published, along with separate monthly reports for England, Scotland and Wales. A further quarterly report for Northern Ireland will also be published separately.
One downside of this new index is the delay in data being published. Data will be released midway through the month, around six weeks after the end of the month in question. The current data which has just been published is for April 2016 with May data not set to be published until mid-July. Furthermore, HPI data for the two most recent months will be subject to revision as further transactions are registered with the Land Registry.
How does the new index compare to previously published data?
In order to show the differences between the new index and the previously published Land Registry and ONS indices, the ONS has produced charts just based on England and Wales data. The average house prices do differ quite substantially, particularly when comparing the new index to the old ONS one. Average prices in the old ONS index were some 40% higher than the average price in the new index. The ONS have put this difference down to the new methodology, in particular the new method of calculating the average value based on the geometric mean rather than an arithmetic mean. The latter method can be skewed upwards by higher value property sales.
While the average values differ, the trends in house price change look fairly comparable between the indices over time.