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A Breakthrough in House Price Indices

April 28, 2005 -- A major breakthrough has been made in the creation of house price indices. The question as to what house prices have done on a national and also local level has never been answered with greater accuracy.



This leap forward has been made possible by Mouseprice.com applying a superior index creation methodology to a previously unavailable dataset containing comprehensive information on the individual price paid for every property sold in England & Wales. The Mouseprice.com set of house price indices are the first in the country to have been created using the repeat-sales regression method.With this method, house price growth is measured by observing selling prices of houses that have been sold more than once - this avoids the problem of comparing 'apples with oranges' that faces existing house price indices. Historically the individual price paid data required by this method was unavailable - however with the Land Registry's release of such data, mouseprice.com were able to employ the advanced statistical calculations necessary to create a ground-breaking set of house price indices.



-For free instant online valuations based on the new index data, visit: www.mouseprice.com/housepricecalculator.aspx

-For answers to frequently asked questions about the house price index, visit: http://www.mouseprice.com/house_price_index/Index_FAQs.aspx

-Statisticians can find the technical details concerning methodology here: http://www.mouseprice.com/house_price_index/House_Price_Index_Methodology.pdf



The Mouseprice.com House Price Index reveals some interesting insights into property prices on the regional, local and national level.



The runaway house price growth of the last five years has been confined to the bottom rungs of the property ladder. Based on the published results from the various other house price indices, a reader could have been forgiven for thinking that house prices across the board have shot up. The mouseprice.com data reveals that this is not the case. For the first time, clear evidence shows that the price growth for higher end properties is very different from those lower down the property ladder. For example a property valued above 250,000 in 2000, has appreciated on average 7.9% p.a. since then- this is remarkably lower than the 17.7% p.a. increase for properties valued below 60,000 in 2000. Figure 1 clearly demonstrates how different price appreciation has been.



Figure 1: House Price Growth by Price Bands. Index=100 on April 1st, 2000.



To access these figures please go to the following link:

www.mouseprice.com/articles/pressrelease-27apr05.pdf



Figure 2: Last-Twelve-Months House Price Growth by Price Bands

By looking at the differences in the demand for the various types of property we can see the reason behind this growth rate differential. With the advent of interest rates at historically low levels, coupled with increasing interest rate stability, there has been a huge increase in the number of buyers of less expensive properties. These have been both first-time buyers and buy-to-let investors anxious to take advantage of the favourable buying conditions. While this has increased the prices of more expensive properties through a knock-on effect, the number of new buyers entering the market for more expensive properties has not been as large. As a result we have seen a narrowing of the gap between the rungs of the property ladder as it were, the more expensive properties have become relatively less expensive!



Regional Inequality -North-South divide is not closing as fast as previously thought

Previous market observers have wrongly interpreted the slower house price growth in London and the South East as a sign that the North was experiencing a regional economic revival and a fundamental shift in fortunes. The huge house price growth outside London and the South East is not a result of regional economic out-performance, it is simply a result of the South having less cheaper property to begin with! The North simply had more of the type of property in demand by both first-time buyers and buy-to-let investors anxious to take advantage of the favourable buying conditions.



Market Stagnation Confirmed

On a National Level, the Mouseprice.com House Price Index reveals that house price growth has finally come to a stand still. For the last three months annualized price growth has been very close to zero percent. (see Figure 3) while other house price indices have identified this pattern, the mouseprice.com's authoritative index confirms nationwide trend.



Figure 3: Annualized Month-on-Month House Price Inflation



To access this figure please go to the following link:

www.mouseprice.com/articles/pressrelease-27apr05.pdf



About mouseprice.com

The website is owned and operated by House Price Directory Limited, an independent company founded and run by former investment bankers, economists and valuation professionals from the City of London. The company aims to create openness and promote accessibility to property market information. The Directors believe that there is no reason why the same analytical valuation techniques used in the international financial markets should not be applied to the market for residential homes. The principles are the same, and with the launch of mouseprice.com the comparable transaction data is finally available.



Contact Information:   


Kristin Garland, PR Manager

House Price Directory Ltd

2 Osprey House, Victory Place

London, E14 8BG

T: 08707 50 44 57

http://www.mouseprice.com

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