Do house price statistics truly reflect the current market opportunities?

Recent house price indices from Halifax and Nationwide have both reported flat for the month of August, with little inflation seen in the market. With many commentators and news reports closely following these monthly indices, the question remains – do these statistics truly reflect the current market and the actual sales and activity being reported by Estate Agents?

It’s true that any barometer based on statistics will always be slightly behind the curve, possibly by 6 months or so, because much of the data (although not all), is based on sources such as land registry, where sales are sometimes agreed several months prior to their actual completion date.

Despite all the statistics pointing to a market in decline, we at De Villiers saw some sectors of the London market prior to the August holidays deliver their strongest quarter of activity in almost 5 years. Indeed, most valuers and agents are now calling the bottom of the market for London’s upper tiers which have corrected so far that buyers, particularly those using foreign currencies, are seeing some of the best buying opportunities in over a decade. I would also add that as well as the £2.0m plus market improving, we’ve also seen some bottoming out and a revival of activity across some of the new build sector, which previously suffered a marked decline in demand over the last few years.

Where perhaps activity is still fairly subdued is the lower tiers of the London second hand market, where demand remains quiet and may have slightly further to adjust from the peak levels.

So what do the statistics currently tell us? Well, we think that both market predictions and indices can provide an invaluable long term analysis of a market’s behaviour, but can also mislead in the short term as we are currently seeing in Central London.

The following table shows the predictions from analysts over the last 3 years and the actual statistics as reported at year end.

What’s interesting is that this table shows that the predictions made by analysts are generally fairly accurate compared to the actual Nationwide Index at year end. However, one area though where caution is required when following these statistics is the reality of what happened in the market is often much worse or better than the reported percentages.

For instance, the London statistics published in August suggest the market has fallen by around 4% on average over the year, but the reality of the last 12 months from most agents is this fall in price is probably closer to 10%. In addition, for the upper tiers of the market most agents have reported that prices above £2.0m have in reality lost around 20%, which is not reflected in any of the main indices.

At times when the markets are in a period of significant decreases or increases, it’s important to look beyond the statistics. Only by getting a true picture of the reality can buyers seize some of the rare opportunities we are seeing by catching the market at just the right time.

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