The UK House Price Index

Summary

The UK House Price Index (UKHPI) was created in 2016 to bring together the UK government's various residential property sales data as a way of offering consumers and the housing industry a clearer picture of latest house price trends. Prior to the creation of the UKHPI both the Land Registry and ONS produced their own regular house price indices.

The discontinued Land Registry House Price Index had been produced monthly using the Repeat Sales technique to sift through latest transactions and calculate the average property price both nationally and locally. It also provided information on volumes of sales.

The ONS is now responsible for calculating the UKHPI but had produced its own ONS House Price Index. This discontinued index was based on data collected by lenders for around two thirds of all UK mortgage completions. It was mix-adjusted, which allowed it to determine the difference in the average price nationally and regionally, as well as by type of property and purchaser. The figures were released monthly and included a seasonally adjusted version to take into account seasonal variations in the housing market. At the end of every quarter the ONS revised its monthly figures to take into account the small proportion of lenders that provide data on mortgage completions on a quarterly rather than monthly basis.

Data

Fed into the UKHPI is official government data from the England and Wales focused Land Registry, Registers of Scotland, Land and Property Services Northern Ireland and is calculated by the Office of National Statistics (ONS).

The range of data covers completed residential housing transactions, whether for cash or with a mortgage. Data is available nationally, regionally as well as at a county and council level.

The index is published monthly, with data for Northern Ireland updated quarterly.

Method

A hedonic regression methodology is used. This factors in a variety of property attributes as well as demographic characteristics of location to produce estimates on changes in local house prices.

To help calculate the demographic characteristics of areas the UKHPI uses geo-demographic segmentation through the ACORN classification, which is produced and licensed by CACI Ltd. This offers a postcode specific analysis of local social factors and behaviour.

Disadvantages

• Characteristics measured in the hedonic regression model are subjective and it is not often clear how certain attributes influence house prices.
• By focusing on house purchase data the figures can be out of date as it can take months for sales to be completed and data to be processed.
• Repossessions and sales at auctions are not included as they are considered commercial transactions.

Advantages

• With access to all UK non-commercial property transactions as well as mortgage completions, the UKHPI offers a comprehensive and accurate picture of house price trends across the UK.
• By combining this wide range of official UK housing market data it offers greater clarity.
• The data is well presented with an easy to use search tool to appeal to the general public, as well as more detailed information available for housing professionals.

Verdict

In terms of pinpointing latest trends, the UKHPI's focus on completed cash and mortgage sales means it will always lag behind other indices that focus on asking prices and mortgage approvals. Nevertheless, with such a wide range of accurate sales data, it is reliable, factually accurate and offers an excellent range of information to the public and experts alike. This bringing together of a variety of official data sources also helps avoid confusion.