The problem with property statistics

Monday 19th April 2010

By Phil Whitehouse, head of The Mortgage Alliance (TMA)

I don’t want to dwell too much on the electoral campaign but lets be honest it’s pretty hard to ignore. We’re all fully aware of how large a platform this provides for various parties to raise their political voices but we, as a nation, have also become increasingly aware of the political spin during such times. We’re often told ‘don’t believe all that you hear or read’ and when it comes to election time this is certainly a phrase that seems to ring true in some quarters.

I’m not insinuating that the information I’m about to focus on is wholly untrue and it’s important that we keep an open mind and even build on the positive aspect of the notion. Anyway, the recent news story that has got my brow slightly furrowed reghards house prices. The sheer number and variety of house price indices, research, reviews and reports can be a little baffling at the best of times even for those working within the mortgage industry as each seem to have a different set of criteria. So imagine the confusion for the layperson when they are being bombarded with various degrees of percentage falls or price rises.
Back to the point in question, the latest house price index from Acadametrics, based on actual transaction prices and using Land Registry data, shows the average house price in March stands at GBP 227,788. The significance of this figure is that it puts the average house price back up to levels last seen in August 2007.

Acadametrics estimates that the average price of property transactions in March was 1.1 per cent higher than February and is up 13.4 per cent compared to the same time last year. It says that there were approximately 10,000 more homes sold in February than in January, but February’s monthly total of 45,000 transactions is below the 51,570 monthly average for 2009. The average house price in London has climbed to GBP 376,605, a record high.

I speak to many brokers on a regular basis. Without even having a direct conversation regarding this matter, and without putting words into anyone’s mouths, I can almost hear the many derisory tones with which this information may be met. I’d be interested to hear if anybody really thinks that house prices have actually reared back up to those heady heights of the ‘good old days’ of August 2007? There is certainly one thing for sure; levels of lending and available mortgage products through the intermediary market certainly have not. But before shooting such information down totally and filing it in the political spin bottom drawer of the cabinet – pun intended – at least we are no longer dwelling on the doom and gloom stories of the recession. Whilst it’s not for me to doubt the credibility of this information let’s compare it our own person experiences of the market and see how it stacks up. It’s evident that there are lower numbers of properties on the market for a variety of reasons which will be reflected in higher asking prices. Therefore because of the laws of supply and demand, some pockets of the UK will show high price level growth versus other maybe less well off areas so we need to look at numbers of transactions as well as the house prices index/stats. It’s also fair to say that London and similar areas will be protected from the market norm because of their special characteristics but despite these factors it remains a somewhat sweeping statement that house prices have returned to August 2007 levels across the board.

However, this optimism appears to be spreading as four out of five (81%) UK homeowners think that property prices will continue to climb over the next six months, according to the latest Housing Market Sentiment Survey from property website, Zoopla.co.uk. The same survey suggests that only nine per cent of homeowners believe that property values will fall over the next six months whilst a further 10 per cent expect prices to remain flat. The average growth predicted by those surveyed is for house prices to rise by 5.7 per cent by October.

So whether or not we actually believe that house prices are back to August 2007 levels is actually somewhat irrelevant as at least house price confidence appears to be on the increase. If only the mortgage financing available could provoke such levels of optimism.

Phil Whitehouse is head of network, The Mortgage Alliance. The Mortgage Alliance has a loyal data base of 7,000 Directly Authorised mortgage intermediaries and as with most firms operating within the mortgage market it is having to overcome a number of obstacles in order to help members write business. He previously worked as a senior manager for Pink Home Loans and spent 25 years with Halifax/Leeds Permanent Building Society running various high street branches. Phil enjoys golf but says: “No matter what I do I cannot get any better and I beat myself up crazily about something that on the face of it is such a simple game."