The first chart below updates a comparison of key UK house price indices. To recap from the previous post:
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The LSL Acadametrics and Department of Communities and Local Government indices are value-weighted (i.e. giving greater weight to more expensive houses). This is appropriate if the focus is the aggregate value of the existing housing stock.
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The Land Registry, Nationwide and Halifax / HBOS indices are volume-weighted (i.e. giving equal weight to expensive and inexpensive houses). This is appropriate if the focus is the price of a “typical” house.
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The LSL Acadametrics and Land Registry indices are the “best” value- and volume-weighted measures respectively, reflecting their larger sample size and inclusion of cash transactions.
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The Halifax / HBOS index has displayed a downward bias relative to the other two volume-weighted indices in recent years, suggesting caution in its use (and explaining its popularity among housing market bears).
Based on the LSL Acadametrics and Land Registry indices respectively:
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The aggregate value of the housing stock was 5.5% below the 2008 peak in August and up 9.4% from the 2009 low. It has fallen 1.1% so far this year (i.e. between December 2010 and August, adjusting for seasonal factors).
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The price of a “typical” house was 11.3% below the peak in August and up 6.8% from the 2009 low, and has declined 0.3% so far this year.
The key take-away is that house prices have shown limited weakness so far this year and remain far above their lows, defying bearish predictions. Recent stronger mortgage approvals, moreover, suggest a recovery in momentum – second chart.
