The price is wrong?

a confusion of the real with the ideal never goes unpunished.

So the Government has launched a review of housing market statistics because it is concerned that the myriad methods used for calculating house prices may be causing confusion.

Get away.

The National Statistician – now there’s job title for you – has started the review looking at the “coherence and comparability” (Yes, really) of the house price indexes produced by CLG, the Land Registry and the papers’ favourites, the Nationwide and the Halifax as well as the figures from the RCIS.

In the old days, all we had was the old Halifax and Nationwide, and how much your property investment had risen very much depended on which one of those you paid most attention to. Now, of course, everyone can, if so minded, be their own house price researcher thanks to the wonderful world wide web and Hometrack, Rightmove, Prime Location, Zoopla, Mouseprice, UpMyStreet, and Mine’ (OK I made those last two up).

The confusion comes in because each one of these indexes records prices at different stages of the home buying process from initial asking price to final, completed sale price. Only in a few cases are those ever the same number. Then there’s the fact that the Land Registry’s data also only covers England and Wales, while other measures look at the whole of the UK, including Scotland which has a very different way of buying a property than the rest of the country.

So it’s not surprising that it all seems a bit confusing. The question I’m asking though is, does this actually matter all that much in the long term?

If you’re struggling to get on the housing ladder, then obviously, you pay great attention to these things. But once you’re in a property, it doesn’t matter whether its value has gone up or down until you want to sell it. It just helps you to feel wealthier if you can see that the house two doors down – which might be a bit scuzzier than yours or with a smaller garden and hideous décor – is selling for more than you paid for yours.

The wider merchant market is rather more attuned to the RMI sector than the new housebuilding market, although clearly damage to the latter will affect the sector. So a busy and healthy RMI-spend would be very welcome for the market.

And, by and large, how much money you are willing to spend – especially on improvement works to your home – is a by-product of how wealthy you feel and how confident you are about retaining that feeling of wealth.

So surely it doesn’t matter which house price index you believe, if you are feeling uncertain about the job market or are looking nervously at interest rates, you won’t want to spend very much on your property. And spending on property is just what we need at the moment – VAT rise or no VAT rise.

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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