I
had the most interesting conversation the other day with a local Oakham
accountant, who asked me about my articles on the local property market. He was particularly interested with the
graphs, facts and figures contained within them – so much so that he recommends
his clients also read them. However, one
question that kept me on my toes was, “With
so many House-Price-Indices, how do you know which one to use and how can you
calculate what is exactly happening in Rutland?”
To
start with, there are indeed a great number of these Indices, including the
Land Registry, Office of National Stats, Halifax, Nationwide and LSL to name
but a few. The issue occurs when these different house price indices give diverse
pictures of the state of the UK housing market. Whilst some indices measure the
average value of every property in the UK (sold or unsold), others measure the
average ‘price-paid’ of houses that happen to be sold over a fixed time scale… confusing,
isn’t it?
A
lot of the variance between house price indices occurs because of the distinctive
ways in which the numerous indices endeavour to beat these issues. You see, the
biggest problem in creating a house-price-index when comparing and contrasting
with most other indexes (e.g. inflation
where the price a ubiquitous tin of beans can easily be measured over the
months and years), is that every home is unique and as Rutlanders are only
moving every 13.5 years, it appears the only thing that can be measured is the
price of property sold in a given month.
By
their very nature, all of the indices are only able to paint a picture of the
whole of the UK or, at best, the regional housing market. As I have said many
times in my articles, it is important to look to the medium term when
considering house price inflation/deflation.
I
can guarantee you in the coming few months, on a month-by-month basis, one or
more of the indices will say property prices will have dropped. Let me tell you, no property market indices
are representative of the housing market in the short term. Many indices have shown a drop around the Christmas
and New Year months, even the boom years of 2001 to 2007 and 2013 to 2015.
So,
back to the question, how do we work out what is happening in the local property market and can there be a 'Rutland House Price Index'?
To
calculate what I consider is a fair and proper ‘House Price Index for Rutland', I
initially needed to decide on a starting place for the index. I have chosen
2008 as far enough away, but still gives us a medium/long term view. Next, I
split all the house sales into their types (Detached/Semi/House /Apartment) to
give us an indication of what is actually selling by postcode district. So, for
example, the following tables shows the LE15 postcode district (the sample
shows 2008, 2016 and 2017.
|
|
2008
|
2016
|
Proj 2017
|
|
Detached
|
49.6%
|
48.8%
|
45.8%
|
|
Semi Det
|
27.9%
|
18.3%
|
22.9%
|
|
Terraced
|
17.5%
|
26.2%
|
27.9%
|
|
Apartment
|
5.1%
|
6.8%
|
3.4%
|
Then
I look at the actual numbers of properties sold in the LE15 postcode district.
Below is the graph with the numbers for the years already mentioned.
Next,
I have looked at the prices paid for those types for every year since 2008,
again in this example using the sample years of 2008, 2016 and 2017 for the LE15
postcode.
Finally,
I amalgamated the same data points for the other postcode districts covered by Oakham
and the surrounding villages, weighted it accordingly, to produce the Rutland
House Price Index ... which after all that work, currently stands at for Q4
2017 at 135.78 (Q4 2008 = 100).
I
hope you found that of interest and, over the coming months, I shall refer back
to ‘Rutland House Price Index’ in future articles.
