House Price Statistics Beware
The government has launched a probe into the use of house price indices, due to contradictions between them.At a time of massive economic upheaval and cost cutting, is the government wasting valuable time and cash?
Likely conclusion of the probe is that all the indices:
• Measure different parts of the housing market
• Data is collected in slightly different ways
• Have different aims/objectives.
• Many of the main index’s are not government statistics e.g. Rightmove, Nationwide.
The main issue is the use and reporting of the data. The media is always hungry for statistics for new stories. Individual news outlets and journalists pick the data that supplements the story of the day and the reader often doesn’t get past the headlines.
A classic example is the recent RIC’s comments on the housing market. I had not previously noted that the evidence they provide is from only 242 surveyors. There are over 1000 towns in England alone and market conditions vary greatly even within towns. The opinion of 242 surveyors is merely presenting a snapshot of the UK market and probably tells an individual home buyer/seller very little about the actual conditions in their area.
There will always be contradiction in statistics and they can also be easily manipulated, as politicians well know. Statistics aren’t the problem it is their presentation and interpretation.
House price indices should be used only for general mid/long-term trend analysis on a regional or national basis. They cannot accurately record what is happening in an individual area and any local predictions should be taken with a big pinch of salt.
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