Rightmove's House Price Index

Summary

Launched in 2000 Rightmove was created as an online property advertising website by some of the UK's largest property and financial firms, including HBOS, Countrywide Assured and Royal & Sun Alliance. In 2006 it became a public limited company (PLC) and its original founders retain around 80% of its shares. It contains listings from around 10,000 estate agent branches, accounting for around 60 per cent of the agency market. In 2002 it launched its monthly house price index. This is based on the asking prices registered on its website. Data available is broken down by region, council area and house type.

Data

The Rightmove index is based upon sellers' asking prices as posted on the Rightmove website. Actual figures are not available nor are they verified by a third party. However, Rightmove claims that about 90 percent of all properties on sale are advertised on its website although this would seem to be an overestimate. It would appear that only properties which are new on the market in any given month are used in the calculation thereby ignoring price changes of properties already on the market.

Method

Rightmove claims to use the mix-adjustment standardisation method although little information is available on how this is applied. The Rightmove index does not adjust the data to seasonal changes.

Disadvantages

• The volatility of the Rightmove index means the figures often vary wildly from month to month and therefore cannot present an accurate picture of the housing market over the short term
• By basing its findings on initial asking prices it ignores reductions in prices that sellers subsequently make and can therefore present an over-optimistic outlook
• The higher price of initial asking prices compared to actual transaction prices also means that Rightmove's average house price figures can often be tens of thousands of pounds more than house price figures released by those such as The Land Registry, whose figures are based on transactions completed
• Smaller dataset than the Home.co.uk Asking Price Index

Advantages

• By compiling asking prices it provides a more up to date snapshot of house prices than those figures that are based on transactions
• It has an advantage over house prices released by mortgage lenders, whose figures are only based on transactions involving mortgages. It is estimated that around a quarter of homes are not purchased with a mortgage

Verdict

Because of the way it uses asking price data, the Rightmove index could be the first to track changes in the property market. However, since the data is not very reliable, the index is not useful as an early trend indicator as monthly changes are too erratic.