House price indices, journalists, politicians, online tools, estate agents, the bloke in the pub, your mother in law and everyone at the dinner table last night – they all sound like experts but do any of them have a clue?
In my wide eyed early twenties I remember very clearly the excitement of wanting to understand more about the spectacular architecture of this city – I would stare at old Georgian, Victorian and Art Deco buildings with wonder and amazement. I wanted to able to see inside them and learn all there was to know about valuing them. I wanted to sell them!
Ten years on and with a wealth of experience and inside information, I’ve yet to come across a tool or any standardised method which will inform you reliably on what the market is doing and the value of your own home. The two of course are mutually exclusive, but in each case there is very little in the way of clarity and uniformity. You could spend an evening reading two contradictory articles, each referencing different house price indices and both having a string of quotes from house builders, estate agents and other professionals in presenting their analysis or opinion.
They would for all intensive purposes, both be correct. Consider these headlines from a single day in March 2016:
‘Average house prices push past record £300,000’, – Sky News
‘UK average house price hits record high of £292,000’ – the Scotsman
To add to this, just about everyone has an opinion! Just bring up the topic over dinner and you’ll know what I mean.
Let’s take a closer look at each.
House Price Index
There are at least 10 organisations producing house price indices in the UK. However, in each case the ‘average’ is defined differently with some looking at just England and Wales and others the UK as a whole.
According to Halifax, house prices in the three months to July 2016 were 1.6% higher than in the three months to April 2016. Nationwide’s highly respected House Price Index shows prices in the UK grew by 5.6% on an annual basis in August, suggesting that Brexit has yet to have any real effect on the British housing market.
Well, according to Hometrack, London has registered a marked slowdown in house price growth over the last three months (fig 1). Average growth in the last quarter was 2.1%, the lowest rate for 17 months. Rightmove statistics from over 90% of the market show price of property coming to market falls by 1.2% (-£3,602), in line with the 1.2% average drop over the last six years at this seasonally subdued time of year.
The Office for National Statistics has attempted to address this confusion by launching a single official UK house price index – one index to rule them all! It shows regional property price variations and sales volumes, as well as price variations by property type and type of buyer. It covers the whole of the UK, using data supplied by the Land Registry, Register of Scotland, Land and Property Services, Northern Ireland and the Valuation Office Agency.
If you’ve ever done a recent Zoopla estimate then you’ll know how ridiculously under or over valued your property is according to their robots. Lots of other websites exist that capture data on you before giving you some misguided sense of what your property is worth, but if you don’t want your inbox littered with spam and a few extra PPI calls, then best to avoid these.
Now I hear some of you saying that all it takes is a simple search on nethouseprices.com and you can give yourself an idea fairly quickly. It takes roughly 3 months for a property to appear on this after it’s been registered with the Land Registry, and if a solicitor is a bit slow to register the sale then you wont see the data for possibly a lot longer (in one instance it was over a year).
So this information is not necessarily up to date, and more importantly, the data does not give you much of a break down on the type, layout, size etc of the property. If you live in an area where all the properties are pretty much the same, it’s less of an issue but in London without this information you ‘re lost.
Get a local agent into your property and in the interest of winning your business they’ll easily entertain your expectations, pander to your delusions and leave you feeling tragically misguided. Understanding the differences between them and which to elect from a sea of choices is another matter. Some areas in London, like Putney for example, have over 175 estate agents covering it!
If you decide it’s time to sell and are persuaded on an ambitious marketing price, the agent will simply manage your expectations down using very clever (and quite fair) tactics until a buyer will present themselves and a deal can be struck. But that can be a very long and frustrating process.
Don’t get me wrong, getting the right agent is key, but chose one that has comparable evidence to back up any claims.
The guy in the pub and your mother in law
Well this is a fun conversation and at best, you’ll have some great anecdotes to think about. If it’s anything like our local then you’ll learn about how cheap they bought their property, how run down the area used to be and how the Chinese are taking over!
So what to do?
The value of something lies only in what someone is willing to pay for it.
Understanding the value of your home is therefore subject to market conditions, which almost always boil down to a local, micro level – in London this is especially the case with a quarter mile radius being your guide, especially as properties vary in size and type so much. How many people are out and about on the search for something, who are they and what are they offering on is important. Adding to this, what’s trading and at what price?
These factors will give you the best idea, broadly speaking, that is. In my humble opinion unless you have access to more sophisticated tools and more reliable, up to date information, then try to avoid some of the headlines, the indices, the articles and all the macro level noise on the subject. Get a good local agent in with comparable evidence but try not come to any firm conclusions as it’s largely speculative and untested.
If you are looking for further guidance and would prefer to get a more precise understanding of the market and the value of your home, please get in touch with me directly and I can happily advise.