Summary

LSL Property Services plc has released a monthly UK house price index since 2010, when it took over the publication of house price data compiled by research and analysis firm Acadata. This had previously been released by the Financial Times as the Financial Times House Price Index. When LSL first took over the index it was renamed LSL Property Services/Acadata House Price Index, but has since been updated to be called the LSL Acadata England and Wales House Price Index (LSL Acad E&W HPI). Acadata refer to its index as the “index of indices” as it is developed from a raft of sources.

Data

The “index of indices” model used by Acadata was first developed in 2002 by Dr Stephen Satchell, from the University of Cambridge, and Dr George Christodoulakis, who was then at City University. Land Registry data on final prices for sold properties is the main source of data used by Acadata but as only around 35% of sales are reported to the Land Registry the research firm also uses data from The Office of National Statistics, Nationwide, Halifax, Rightmove and Zoopla. Separate Scotland and Wales only house price indices are also released each month and called LSL Acad Scotland HPI and LSL Acad Wales HPI.

Method

The LSL Acad E&W HPI and its Scotland and Wales indices are adjusted seasonally and use mean-variance quadratic optimisation in order to produce the optimal forecast weights. The starting point is the Land Registry data, and each of the other indices is taken as a forecast of the Land Registry reports. Each monthly release updates the previous two month's releases to include all transactions over that period. This enhances the accuracy over a two-month period so that for example December's house price index will include what Acadata labels a “final, definitive” result for October.

Disadvantages

• It is only as robust as the figures it collects. Some will be out of date and take time to filter through, such as final transaction data from the Land Registry. Others, such as those from mortgage lenders, do not include transactions without a mortgage.

Advantages

• This is a useful indicator of the state of the house price market as it combines the accuracy of the Land Registry with up to date figures from mortgage lenders.
• The index also ensures that factors such as size of a house, local variations and seasonal differences in the property market are taken into account.

Verdict

The Acadata index of indices model is a useful way of resolving disputes between the other major house price indices. Its monthly updating of figures as house price information becomes available potentially put it among the most accurate house price indices. The LSL Acad E&W HPI's monthly publication makes it a timely addition to the various house price indices available.