Summer 2011 Property Prices and Surveys
First time buyers need to put down deposits averaging 20% of the value of the homes they are buying, reflecting the continued caution of lenders in offering new loans. The market is generally sluggish. According to the latest survey by the Royal Institution of Chartered Surveyors (RICS), prices continued to fall back while sales rose only marginally across the country, though London was said to be more resilient. The uncertain economic climate is making transactions more difficult and longer to conclude and the rationing of mortgage funds and economic uncertainty means the "stalemate" will continue, but is this true? How do they know this?
The RICS
The RICS rely on their survey of members, a survey that reflects confidence in the property market rather than what is actually happening to house prices. About 250 estate agents in the UK, who are members of RICS, are asked if they feel prices in their own areas have been rising or falling in the preceding three months. Although this appears to be a subjective way of measuring property price changes, generally speaking, the RICS survey is the first to show any sea change in the market.
So stalemate it is, but are we crossing this calm sea or are we becalmed in the middle of it and is this a picture repeated through every town and village in Devon or just a meaningless average?
Prices go up and down. If the RICS are not actually measuring house prices perhaps we need another? Different surveys take data from different stages in the house buying process and also have different parameters. So how do house price surveys work and which one should you trust?
House Price Surveys Explained
There is a big difference between what the national trend might be and what will actually happen to your house, but let’s start with the broad picture.
Land Registry Price Survey
The Land Registry has been recording the price of all property sales since April 2000. The survey features the end of the buying process when a transaction is registered. The Land Registry only measures the change in the price of properties that have been sold before, to ensure a proper comparison and can provide an accurate picture of prices down to postcode level.
Government Price Survey
The government has its own monthly house price index, issued by the Department for Communities and Local Government (DCLG). It covers the whole of the UK and is based on data supplied by the Council of Mortgage Lenders. The DCLG said average UK prices dropped by 0.5% in May, and by 1.6% over the past year. Only in London have prices gone up in the past year. This covers a large sample of completed sales that have gone through with a mortgage (about 60% of all sales) – but cash sales are not included. This survey is also influenced by the total amount of money spent rather than the number of transactions and hence London and the South East, where house prices are highest, will have a greater influence.
Nationwide and Halifax
Perhaps the best known snapshots of the property market are provided by two of the UK's biggest mortgage lenders - the Halifax, now part of Lloyds Banking Group, and the Nationwide. Both surveys are based on a sample of each lender's own loans each month. The prices measured are those agreed at the point when the mortgage is approved, not at the later point when the sale is completed. Read more on the BBC's news pages.
Hometrack
Hometrack Data is collected from 3,500 estate agent offices from all 2,200 postcode districts in England and Wales. The estate agents report whether asking prices are rising or falling. They are asked to report the "achievable selling price" for each of four standard property types in their area.
Rightmove
Rightmove's survey operates by collating asking prices for houses placed on its own website over the previous month. The firm says its website now displays 90% of all homes for sale in the UK. However, it obviously does not reflect the prices at which properties actually sell.
Conclusion?
It seems there are numerous surveys upon which to base your individual decision, but that they are not really designed with the individual decision-maker in mind!. Beneath the headline figures lie a vast number of individual transactions, some fast, some slow, some easy and some not. What every home seller needs is good solid local advice from an agent who knows. I recommend Luscombe Maye. Who else is there? At the end of the day, we can all take note of what the papers etc say, but we don't all believe everything we read do we?
M Luffingham
Managing Partner