Are media headlines based on ‘average data’ influencing our decisions to buy, sell, invest or re-mortgage? Our guest explains why she thinks that’s the case.
This is a guest post by Kate Faulkner. All views expressed are Kate’s own and not necessarily shared by Which?.
I’ve been working with property price data for several decades, and I am concerned that, although we can all access individual property price data free of charge, media headlines based on ‘average data’ can still influence our decision to buy, sell, invest or re-mortgage a home.
So what’s the problem with national and regional property price data?
Headlines for July 2020 told us ‘house prices have fallen for the first time in eight years’, suggesting that the market was failing.
The ‘evidence’ behind this scenario was Nationwide’s reporting of an incredibly tiny 0.1% fall in house prices year-on-year, this data originating from the lockdown period. So not only was the fall really insignificant, it was also from a time when the moving market had pretty much shut down.
For most people considering buying, investing or selling a home, or re-mortgaging, headlines declaring that house prices are falling makes the decision far more nerve-wracking and stressful than if prices appear to be stable or rising.
Should we worry about national and regional averages?
I don’t think so. In contrast to that report, agents who kicked off the home-moving process are finding the market extremely buoyant; and respected analyst Hometrack said:
“UK house price inflation in the 12 months to June 2020 edged higher to +2.7%”
It’s not unusual for different indices to report different price movements on a monthly basis, which is why I summarise and explain what’s really happening each month.
Why individual property price data is more important
In reality, my research of the last year tells me that for individual properties, prices have increased, decreased or stayed the same.
These variations may result in national or regional ‘averages’ being reported up or down, but this doesn’t matter. It depends solely on how many properties are for sale versus how many potential buyers can and want to purchase there and then.
I’ve studied property prices for many years, looking at national, regional, town and city data – useful when considering the market generally. But when advising individual buyers and sellers, I now focus on property prices street by street. In my opinion, all that should concern anyone is:
🏠 The value of their home now
🏠 The value of the property they’re buying now
🏠 The likely future value of their new home
As a practical illustration, the following two tables show the vast difference in property price averages and how different the year-on year-increases and decreases are, according to the government’s Land Registry data.
Source: Land Registry March 2020
For England, the average property price is reported as £248,271 in March 2020, a growth of 2.20% year on year. This compares with regional average variations between 1% falls to 4.7% increases and average prices of just £126,945 through to £485,794
And even with regional data, within each region there’s huge variation. Here’s a break-down of regional and city data for Yorkshire and Humber:
Source: Land Registry March 2020
However, the real differences can be seen when you look at different property types and individual properties on specific streets.
For example, the Land Registry reports flat prices in York are down by 0.7% year-on-year, while semi-detached and terraced properties are up by 1.4%.
Not a huge difference, but even this can be misleading: when researching further, some flats could be very popular and thus rising in value, while others could be overtaking a 0.7% fall. And it’s the same for other property types.
In my experience, ‘averages’ at any level in property prices are now irrelevant for individuals moving, investing or re-mortgaging.
What matters is how the price of the property you own, are selling and/or buying is behaving.
The only way to discover this is to talk to local agents who can give you a true overview of the current market, and for you to check, free of charge, the history of individual property prices via price paid data
This was a guest post by Kate Faulkner. All views expressed were Kate’s own and not necessarily shared by Which?.
Do you feel that media headlines concerning average prices affect your decisions around property? What research do you carry out in advance of entering the market?