What is the House Price Index?
Much has been made of house prices across the UK over the past few months. With affordability becoming unreachable and the cost of living seeing people consider relocating to cheaper parts of the country, the house price index has been a welcome data source to help give people a rough idea of housing costs in their area.
But what is it? What does it mean, and does it give a true representation of the house prices?
Simply put, the house price index is a national statistic that shows changes in house prices across England, Wales, Scotland, and Northern Ireland. Data is released by a variety of reliable sources, including Halifax, Zoopla, Rightmove and the UK government. In the case of the government, the data is released monthly to cover the national average as it was six weeks previous. For example, January 2024 data is released on March 20th, 2024. For Northern Ireland, the data is published quarterly.
In this edition of our blog, we explain all there is to know about the house price index.
How does the house price index work?
The house price index uses property sales data supplied by the Land Registry, Registers of Scotland and the Land and Property Services Northern Ireland which is calculated by the ONS to provide us with the change in house prices per region. These prices are calculated using what is known as the hedonic regression model of gathering and measuring statistics.
However, there are different types of house price index available, and each takes a different approach to collating its results.
Are there different types of house price index?
There are a few forms of house price index you could choose to use but much depends on the accuracy of the data you wish to obtain from it. Some HPIs will illustrate changes in house prices based on completed sales, others will compile data based on mortgage approvals and others will use the current asking prices.
The most common house price index data used by those looking to buy or sell are:
- Rightmove
- Zoopla
- Halifax
- ONS (UK Govt)
How do these groups use their versions of the house price index?
Each one of the four we listed above provides you with information relating to the changing house prices across the country, but the sources of their data vary. Often leading to conflicting results between them all.
Rightmove
The Rightmove HPI covers England, Scotland and Wales and bases its data on the asking prices of property listed on the property portal. The data is released monthly and covers the previous month, allowing for a fast transition of information. For many, this data helps get an idea of the path that house prices are taking. You can also view some important data relating to first-time buying such as expected mortgage payments and expected house affordability based on average salaries.
Zoopla
The HPI used by Zoopla is a repeat-sales-based HPI that uses sold prices, mortgage valuations and data from recently agreed sales. It is updated monthly and provides those looking to buy or sell with a variable amount of information that could help inform them of whether the decision to buy or sell is the right one at a specific time. With the Zoopla HPI, you can view house prices but also information relating to mortgage rates.
Halifax
Halifax uses a smaller pool of data than both Rightmove and Zoopla. It’s estimated they use data from around 15,000 mortgage approvals, compared to 100,000 or more listed properties from the two online property portals take their information from.
Halifax calculates its HPI based on mortgage approvals and has the data released weekly, providing home buyers with almost live information. As they use mortgage approvals to collate their information, Halifax can often be a good HPI to give you an idea of the price that property is selling at.
ONS
The ONS data covers the entirety of the UK and only compiles its data based on completed house sales. This gives you perhaps the most accurate results for how prices are moving in your region. Every type of property sale is included in the ONS data, meaning that cash house buyers and those who used a mortgage have their purchase recorded on it. Data is a little slower to filter through on this index as it is dependent on Land Registry information, whereas the others are all calculated on mortgage approvals or asking prices within their business.
How accurate is the house price index of the ONS?
The data shown on the government HPI is perhaps the most accurate to use. With both cash and mortgaged sales counted, it provides a truly accurate representation of house prices across the UK. Where others dismiss cash sales and only factor in mortgage approvals and asking prices, a fairly large portion of property is omitted from the data they provide.
What are the advantages and disadvantages of the other house price index datasets?
All have their advantages and disadvantages. Much depends on what you want from them.
Rightmove provides you with fast information taken from a wide range of properties and helps you see if asking prices are rising or falling. This can also be detrimental though. An asking price remains an asking price if the property doesn’t sell, and these figures are still included in their HPI. Furthermore, the method Rightmove use to calculate pricing means that more expensive properties can tilt the HPI further away from the true value of property in the area.
Halifax are among the biggest lenders in the country, so the data provided by them is often a good indication of borrowing trends and as a result, house prices. Mortgage approvals are a better indicator of house prices than asking prices, making the picture clearer with regard to how much people are paying for property. However, as we mentioned earlier, the Halifax data only covers mortgaged properties, not cash, and only the properties mortgaged via Halifax. Meaning a truly accurate idea of current house prices is not possible.
Zoopla operates in a similar way to Rightmove with a similar data pool so both the advantages and disadvantages of the Zoopla HPI are more or less the same as those of Rightmove.
What house price index should I use?
As we touched upon earlier, much depends on what you need the data for. For a quick glance at how prices may be going, Rightmove can be a great starting point. It’s a vast pool of data and is updated frequently. If you want a clearer picture of the prices property is selling at, you could use Halifax, just remember, the number of properties is substantially smaller and only factors in mortgaged property. If you want completely accurate data that covers prices for all sold property, then use the data from the ONS. If you have seen that house prices in your area are fluctuating but need a fast house sale, speak to Gaffsy. We guarantee your house sells in just seven days, or longer if you need it, and it won’t matter where in the country your house is, the condition it is in, or the type of property it is. We buy any home, and we buy it at no cost to you, allowing you to keep more of the money from your house sale. Speak to our team of quick house sale experts today
