What’s really happening with house prices

Q. I’ve heard that property prices are softening but I see conflicting reports. How can I find out what’s really happening?

A: It can be really confusing reading about house prices, and trying to establish a clear picture of what’s really happening can be difficult. Firstly, data is often reported with a certain slant; an estate agent’s research may want to show a positive house price outlook for example, or a press report may give a negative slant to fit in with a particular story line. House prices are always a hot topic and are widely reported, so there will always be contradictory messages across different press articles, estate agent research reports, the Land Registry, house price indices, and so on.

Secondly, it’s important to understand how relevant the data is and how it’s compiled. A lot of data is ‘big picture’ and, therefore, rarely specific enough for you to be able to apply it directly to your own property negotiations. For example, many reports focus on house prices across the UK as a whole, or within a particular borough. If you’re looking to buy a three-bedroom property in a particular area, it would be much more helpful to know what’s going on with prices of other three-bedroom properties in that location – rather than the data being skewed by sales of larger houses which aren’t relevant to you.

The data input is really important too; house price indices and surveys often show different stories because they track different parts of the purchase or sale process.

The Royal Institute of Chartered Surveyors (RICS) Housing Market Survey focuses on when a purchase has been agreed and a survey is carried out. Each month RICS asks approximately 285 chartered surveyors whether they think house prices have risen, fallen, or stayed the same over the previous three months. Whilst this gives some indication as to the direction of the market, it is based on surveyors’ opinions, rather than hard facts, and it doesn’t go into detail about how much prices are rising or falling.

Mortgage lenders Nationwide and Halifax have indices that focus on the next stage of the buying process, which is the mortgage lending stage. The downside is that they only take into account properties which are being bought with a mortgage and exclude purchases where no mortgage was required, which can be significant in some areas. These indices also don’t make provisions for purchases which fell through after the mortgage was approved.

Land Registry data records the final stage of a transaction, recording all successful completions, but the downfall with these figures is that they can be quite out of date because the time between a property going onto the market, completing, and then being recorded by Land Registry, can take months in most cases, so the market may have moved on since then.

If you want meaningful pricing information, my advice is to focus on the area you’re looking to buy in, focusing only on specific and comparable properties, rather than the area as a whole. Just remember that a property value isn’t scientific; it’s what someone is prepared to sell for and another person prepared to buy for.

If you have a question you’d like Jo to answer please email @Jo.eccles@eccord.com or tweet her @joeccles.