Understanding Shropshire House Prices

The media has always been awash with seemingly contradictory house price information from different sources.

It’s not uncommon to hear that house prices in Shropshire have gone up on the television first thing in the morning, but to hear that they have fallen by the time you drive into work.

In this blog, Michael Nettleton, director of leading Shropshire Surveyors & Estate Agents Nock Deighton, sifts through the nonsense and explains the differing methodology of the best known providers of house price data...

The constantly contradictory content of the reports is a significant cause for confusion in the Shropshire housing market, but once you understand the nuances and limitations of each report, a rational and informed decision of whether to buy or sell a house in Shropshire can be made.

Perhaps the best known of the reports are:

• Nationwide
• Halifax
• The Office of National Statistics (ONS)
• The Royal Institution of Chartered Surveyors (RICS)
• Rightmove
• Hometrack
• The Land Registry

The media are wonderful at interpreting the data to suit the news agenda of the day.

To put this in perspective, in February 2015, Rightmove reported house prices went up 2.1%, the Land Registry reported a rise of 1.3% and Nationwide actually reported a FALL of 0.1%!  You can clearly see why headline writers can have a field day with this on a slow news day.

Let’s go through the different methodologies and see how they arrive at their conclusions.

Nationwide and Halifax

The two companies compile their database in almost identical fashion. On taking a sample of the approved mortgage applications processed in the month, they compare with a similar for the month or year before. This is ok but has a number of key limitations:

1. This is only a sample of their activity.

2. It excludes all other competitors mortgage activity in the market.

3. It excludes all non mortgage based transactions such as cash purchases.

The Office Of National Statistics

This is similar to the Nationwide and Halifax. Their methodology involves a sample of about 65% of mortgage completions as collected by the Council of Mortgage Lenders. Their own formula is applied and an “average house price in Shropshire” is calculated.

Limitations:

1. It’s a sample.

2. It excludes all non mortgage dependent transactions.

The Royal Institution Of Chartered Surveyors (RICS)

The RICS conducts a survey each month asking its members whether they are seeing house prices rise or fall. These responses form a sentiment rating which is a positive or negative figure depending on the majority view. An example result may be “27% more Surveyors in Shropshire have seen house prices rise last month”.

The main limitation with this is that it is based on opinion rather than facts.

Rightmove

Rightmove has a very different approach and base its results on asking prices. In simple terms, it’s a bit like looking in an estate agent’s window and making a judgement as to whether house prices have moved at all. (Admittedly, Rightmove is a very large shop window!).

Limitations:

1. Only properties on the market are included.

2. Sold prices are not taken into consideration.

3. Not all homes sell for the asking price.

4. A large percentage of homes on Rightmove never sell.

Hometrack

This survey is conducted by asking Shropshire estate agents what their opinion is on house prices in the area. Assuming a willing seller and a reasonable time on the market, what would a typical type of property in the area sell for?

Limitations:

1. Based on opinion.

2. Includes properties not on the market.

3. Are the agents being objective in what they say?

The Land Registry Report

As all homes have to be registered with new owners after a deal is done, the Land Registry just works out the change in price for each individual home compared to when it last changed hands.

Limitations:

1. The report takes about three months to produce, meaning it’s virtually out of date before it’s even published.

2. It only includes homes that have changed hands.

So what does all this tell us?

While all of these reports can, and do, give a useful flavour of what is generally happening in the Shropshire housing market, there are clear limitations to each of them.

Combined with the fact that they are predominantly national as opposed to local statistics, the only real way to get an accurate figure for the value of your home is to speak to a competent, experienced and honest local estate agent.