News: Weekly News Round Up - Housing Data Under Fire

Sat, 23 Aug 08

This week the government practically admitted what homebuyers have known for some time, that housing market statistics need to be taken with a good pinch of salt.

HM Revenue and Customs was forced to delay publishing its official housing market statistics after finding “significant and unexplained differences”, compared to the previous months figures.

The latest figures, relating to properties worth more than £40,000 in England, Wales and Northern Ireland, will now be revealed in the next scheduled update on 21 September.

In a statement HMRC said: “We are working to understand the reason for these differences so that a reliable set of statistics can be produced.”

Understanding the reason for differences between all housing data is something those monitoring the housing market have been struggling with for years.

With so many different house price indices produced each month, all with wildly differing figures, it is no wonder there is confusion.

Figures released this week by Rightmove.co.uk are a case in point. Rightmove revealed that prices have dropped by 4.8% over the last year and by around 5.3% in London between July and August -  see Home News 18 Aug 2008.

This looks remarkably bleak when compared with figures released by the Financial Times earlier in the month that said the yearly fall in prices in July was just 0.3%  - see Home News 11 Aug 2008.

Furthermore it appears positively optimistic when compared with the view earlier this month of city analysts such as Cantor Spreadfair and ABN AMRO, who in the same newspaper predicted a slump in house prices of 30% over the next three years- see Home News 4 Aug 2008.

So who is right? Obviously none of them can accurately predict the exact price of any given home.

Further analysis is needed. Rightmove’s figures for example are not mix adjusted and can vary wildly from month to month compared to other house price indices.

Rightmove’s figures also do not take into account reductions in prices that sellers make after putting their house on the market.

It is welcome that HMRC is looking closer at its figures, but any search for a truly accurate house price prediction is likely to be fruitless.

Meanwhile for those looking befuddled at each new house price index the best advice is to use them as a useful guide only. The figures may differ but they are all heading in the same downward direction.

Elsewhere in housing market and house price news this week the Council of Mortgage Lenders revealed that gross mortgage lending has fallen by 27%, as first time buyers struggle to find a good deal.

Bob Pannell, CML head of research, is also pessimistic for the future, saying that the figures point towards more subdued levels of lending in the second half of 2008 - see Home News 21 Aug 2008.

This has left the housing market largely static, creating a massive increase in the number of rental properties on the market.

According to figures released by the Royal Institution of Chartered Surveyors (Rics) 43% more of its members reported a rise in landlord instructions than saw a fall during July, a leap of 13% on its survey the previous month.

RICS says that frustrated homeowners unable to sell have been forced to rent out their homes is the chief cause, as is increased demand in the rental sector due to the swathes of potential first time buyers unable to buy - see Home News , 19 Aug 2008.

More solutions to this crisis were put forward this week, most notably from the British Chambers of Commerce (BCC) which is urging the Bank of England's monetary policy committee to lower the base rate as soon as they can, to avoid further housing market upheaval.

Better mortgage deals is another solution and latest figures from price comparison website Moneyfacts show that rates are improving. The average two-year fixed deal is now 6.59%, around the same level as in august 2007 and significantly down on July 2008’s high of 7.08%.

However Moneyfacts warns that this is not all good news. Many of these rates are still only available to those with large deposits and lenders are still failing to reduce their enormous administration and arrangement fees. The average fee is now £964, compared to £800 this time last year.

See Also – Asking Price Index; A Guide To House Price Indices



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