Hurrah! Are Price Indices On The Ropes?

Within a few weeks, house price indices will be in the news.

I am not referring to yet another story about the latest tiny price movement - there will be one of those any minute - but instead, who prepares what indices, when and how.

In the snowy days before Christmas an under-reported 52-page document was issued by the National Statistician, Jill Matheson (it’s here on the NS website). The accompanying press release was interpreted as saying Matheson wanted to merge the Land Registry and Department of Communities and Local Government indices. She did, but her report went much further.

For Matheson’s ambition is not merely to save money by rationalising the ‘state funded’ indices, but to create such an authoritative index in their place that most of the other current 20-plus ‘private’ indices become effectively redundant too.

If she succeeds, many people will cheer - and I will be one of them.

The downturn has shown that the plethora of indices from government, lenders, professional bodies, estate agents and many others are more confusing than enlightening. Vendors and buyers in particular can be misled, thinking the price of every property everywhere moves in line with the last well-publicised index finding.

The blame for the confusion (I would say this, wouldn’t I?) is surely with property industry players who create these rival indices. Many of them are statistically robust but serve little purpose other than concoct publicity for the company sponsoring the index in question.

Interestingly, Matheson’s report specifies only six non-government indices that she clearly regards as the most important - the others do not get even a name-check.

A few national tabloids and lots of local papers (the latter reliant on flattering estate agents to keep their advertising) often create misleading stories based on one set of results, and of course that is daft - but it is equally absurd to blame the press entirely for today’s mess.

Papers will inevitably report figures issued with a fanfare and a big PR budget, even if they do not represent the long-term trend: to suggest papers should do otherwise is like saying they should not print the result of one football match, but only the end-of-season league table.

If agents and developers believe too many indices confuse issues, then stop contributing data to the minor ones and stop producing their own. If they do so now, they may be saved the embarrassment of having their figures being rendered useless by the National Statistician’s new all-embracing index - she promises to give details before Easter.

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