House Price Surveys Explained – It’s Not All Guesswork

Well, here at the Big Property List we seem to be reporting on house prices going up and down every other week so we thought we would take a look into the house pricing process and what it all means.  How are these figures generated and do they give an accurate picture of what is happening in the UK with regards to house prices.  If you are looking to move home in the near future, it pays to check out the latest properties in your area and get a good idea of what is going on.

Land Registry

The Land Registry has been recording property prices since April 2000 and records all completed property sales in England and Wales.  Their data however goes back as far as January 1995.

Using a process called Repeat Sales Regression, the Land Registry measures the changes in property prices over time.  This means it will only measure the change in price of properties that have been sold in the past.  This gives a fair and proper comparison.

Most property sales are included in the Land Registry survey except the sale of commercial properties and ex-council properties sold at a discounted price.  Any property transfers or repossessions following a divorce are also excluded to avoid misleading the statistics.

A report is published each month on the Land Registry website and a quarterly survey is also published on the BBC News website.

An average price is reached by adding up all the transactions in any given month and then dividing the total number of sales.  Almost all residential sales are included and recorded providing a really unique picture of national and also local property prices.  The Land Registry can actually give a fairly accurate insight into prices at postcode level.

Government Price Survey

The Government also produces its own monthly house price index.  This is issued by the Department of Communities and Local Government (DCLG).  The survey covers the whole of the UK and is based on the data received from the Council of Mortgage Lenders.

As a result of data being supplied by the Council of Mortgage Lenders and including the number of mortgage-based sales, cash sales are not included.

Nationwide and Halifax

Both surveys provided by the Nationwide and Halifax, cover the whole of the UK and are based on a sample of their loans each month.

Property prices measured in these surveys are those which are agreed with a mortgage is approved and not later when the sale is at completion stage.

Just like the DCLG survey, the Nationwide and Halifax surveys are based on mortgage-based property sales so no cash sales are recorded.

Royal Institution of Chartered Surveyors (RICS)

The RICS survey reports on confidence in the property market and not the latest changes in property prices.  A survey is conducted of 250 estate agents in the UK (all members of RICS).  They are asked whether they feel the prices in their areas of business have been rising or falling over the previous 3 months.

Whilst this might  not appear to be a reliable way to measure the property market, it is actually quite useful in reflecting changes and how professionals feel the market is developing over a given time period.

As well as house prices, respondents are also asked how they feel about a number of other subjects such as the number of property buyers falling or rising.

The data provided by these house surveys is very useful and helps those in the industry determine the latest trends and property prices and those looking for a new home to strike whilst the iron is hot or hold back until situations improve. 
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Ex-Council Property Could Save You 25%

If you’re desperate to get out of the rental game and onto the property ladder, there could be a way to save at least 25% on the house price in the process.  Rising numbers of local authority houses and flats are being released onto the market in metropolitan areas and many can cost at least 25% less than comparable properties in the same areas.

However, it’s important to know exactly why these properties are so greatly reduced in price.  There are often notable differences in the nature of ownership of the property and these financial aspects need to be taken into account.

David Kempster, a directory of property search company SearchFlow, says “If you buy a local authority house, the chances are you will do so as a freeholder.  But in the case of the flats, the council tends to retain the freehold so you can only buy on leasehold.

“This is a vital distinction, because leaseholders are liable to pay not only a service charge, but potentially maintenance costs too. The legal principle of ‘caveat emptor’ or buyer beware means owners have no come-back if they unwittingly take on liabilities when purchasing a leasehold.

“For this reason, it’s important to check exactly what the service charge covers and if possible, to see previous bills. It’s also essential to check for scheduled maintenance as service charges don’t cover major maintenance and renovation work. In some cases, leaseholders can become liable for as much as £60,000 to put toward lift and roof repairs.”

If you’re going to consider one of these ex-authority properties you might also need to consider the proportion of private ownership on the street or estate.  If there are other like-minded people who have bought into ex-council properties you might be welcomed a little better than if you were the only non-tenant living on the block.  There is also a chance that prices on these properties might rise quite quickly.

Richard Sexton, a director of e.surv chartered surveyors said “Historically, these properties have generated less demand than equivalent private sector stock, though as private ownership increases in a given development this effect lessens. Buyers need to consider long term prospects; one day they are going to want to move up the property ladder.

“Make sure your legal adviser investigates the property fully and takes account of any communal costs. There may be clauses which require significant contributions to parts that may not even affect your flat.”

The good news is that most local authorities will ensure potential buyers have all the facts before they buy any ex-council property.  In the case of shared areas there could be communal repairs required and maintenance bills to pay.  All potential buyers should be given an assignment pack from the council in question detailing any works that are required to the building.

Surprisingly, some local authorities actually resent private ownership of ex-authority property and may be less than happy to help obstructing your path and failing to give you all the information you need.  If you are dead set on buying an ex-council house though there is some detective work you can do.

Nicholas Ayre, a director of buying agents Home Fusion, explained: “Find out if the building or estate has a residents’ association and, if so, to get in touch.

“They might be able to provide you with a copy of their minutes from a recent meeting or talk to you about any maintenance and repair issues they are currently trying to resolve.”

When considering ex-council property it’s pertinent to ask the local authority the same questions you would ask of a private seller.  Ask about council tax, how safe the area is, where local amenities are situated etc.

As long as you ensure you get all the facts, ex-council property could be the answer for young people looking to buy their first home for less. 
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How Much is my Property Worth, and Why?

Do you have an idea of how much your property is worth?

It is an important and often misunderstood question. Many people assume that they can find the value of their property rather easily, by checking on the value of houses for sale in their local area. While this may give you a rough estimate of what your house could be worth, it is worth remembering that there can be large discrepancies in house prices, even within the same area or even along the same street.

Knowing what your property is worth is important. Many financial institutions will often use the value of the property as the basis for how much money they are willing to lend you. You also need to know the value of your property when it comes to renewing your home insurance. It is worth remembering that home insurance comes in two parts; contents insurance which covers your personal belongings and items that are not physically part of your home and buildings insurance. Buildings insurance can be the bigger challenge as you need to know the value of your home accurately and roughly how much it would cost to rebuild it at current market prices.

So what indicators can you find around your home that may well add, or detract, value from its overall price?

1. Extensions or conversions: If you have extended your home by adding additional rooms, or a conservatory, or perhaps have had the loft converted into a living space, this can add considerable value to your property compared to others in the area. Smaller changes in the home, such as changing a small room from a bedroom into another bathroom can also affect house prices and not always positively.

2. Garden area: In many areas, the amount of gardens the properties have is not always uniform. Obviously, those with larger gardens and more land tend to sell for a tad more than those with less. In addition, how that land is used, whether it is manicured gardens, wild grass or paved to allow for off road parking, can impact on the overall value of your home.

3. Security: The level of security your home has will also affect its value. If your property comes complete with deadbolts on main doors, double-glazed windows with individual window locks and is fully alarmed then it will be worth more than others that do not have these improvements.

4. State of repair: The general state of repair of your home also reflects its value greatly. This can easily be demonstrated by watching any of the TV shows that deal with housing developers who buy run-down properties, renovate them and then sell them on, often at significant profit. The better shape your house is in and the less work that needs completing on it, then the more it will be worth.

5. Issues: If your home has problems, such as damp or subsidence for example, then this can significantly affect the amount your home will realistically be worth.

6. Other buildings: If your property is large enough to include other buildings, such as a shed in the garden or other outbuildings, then this can increase the value of the property markedly too. How much this is depends very much on the location of the buildings, their state of repair and their functionality.

Understanding what your home is accurately valued at is a key issue for homeowners, whether you are seeking additional finance or trying to ensure that you have adequate home insurance cover, finding the realistic value of your property is a crucial step in securing the deal you want. 
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What’s in a Number? Why Living at No. 13 Could Save You Money

What’s in a house number?  Well, it all depends how superstitious you are.  Whilst many hotels have avoided using the number 13 for their room numbers, there are many streets with a house brandishing the number 13 on the front door.  There are also many streets without a number 13 such is the mistrust of this number.  However, what might be unlucky for some might be lucky for others.

Whilst superstition about the number 13 might seem a little irrational many of us do believe that this number will bring bad luck and misfortune.  But did you know that houses with this number are likely to be worth £4000 less than their identical neighbouring houses?

A recent study looking into the value of all properties in the UK found the average price of a ‘number 13’ home as being £205,085 whilst neighbouring houses were priced at £209,009.  These houses were identical all apart from the number on the door.

The number 13 has been associated with bad luck for many centuries and even has a phobia named after it – those suffering from ‘triskaidekaphobia’ are petrified of the number 13 and all that it might represent.

Some house builders are permitted to leave the number out of new council housing developments.  Lewes District in East Sussex says the number 13 can be omitted from plans if specifically requested.

The findings on home value come in research from property website Zoopla.co.uk. It said that for those looking to buy a house and who do not care about a number -purchasing an address at number 13 is a chance to save a tidy sum.

There are many reasons why the number 13 is considered less than lucky, but in some countries the number is very lucky.  If you are property hunting, not particularly superstitious and looking for a bargain then number 13 might be for you.  If you are one to not walk under ladders, open an umbrella indoors or put shoes on the table then number 13 is to be avoided! 
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Property Prices In Yet Another Tumble

Once again the housing market has taken a tumble.  The average cost of a home fell 1.4% last month – a drop that hasn’t been seen since July 2009.  The Halifax house price index reports the latest plummet has led to property values being 3.7% lower in April than during the same period last year.  This is the biggest decrease since October 2009.

What’s the Cause?

Well, Halifax have blamed the recent fall on fragile and cautious consumer confidence.  The economic climate is still relatively uncertain and this has decreased demand on property and caused a downward pressure on property prices.  Since the low that property prices hit in April 2009, they have only risen 4% whilst they are still 20% below the peak they hit before the credit crunch struck back in August 2007.

During the past year, house prices have been particularly volatile and if you’ve been keeping track of the Big Property List blog then you’d have seen our reports of house prices going up and down like a yo-yo.  House prices have dropped in seven months, risen in four and remain unchanged in one month and that volatility looks set to continue.

Often seen as a slicker and better indicator of property market trends, the quarter on quarter indicators showed acceleration in the rate of falling property prices.  During the three months towards the end of April, homes lost 1.2% of their value.  That’s double the 0.6% drop that was recorded during the three months to the end of March and also the most dramatic quarterly fall since October last year.

Regardless of these miserable figures, the Halifax has said that they expect the rate of falling property prices to slow down.  Martin Ellis, Halifax’s housing economist, said “Signs of a modest tightening in property market conditions, an increase in the number of people in employment, and a relatively low burden of servicing mortgage debt are all factors that are likely to provide support for house prices, curbing the pace of the decline.”

Are the signs there?

Martin Ellis also went on to say that he thinks the signs that the housing market is stabilising are there albeit at a lower level than the historical average.  However, Howard Archer, chief UK and European economist at HIS Global Insight showed less optimism saying, “We believe that house prices are likely to end up in decline by around 10% overall by the start of 2012 from their peak in 2010.  This implies that they will fall by about 5% more.”

It seems to be a tough one to call, but one thing’s for sure.  The Big Property List will be reporting on property market news as it happens and giving you access to the latest views from the industry experts. 
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A Hidden Boost for House Prices?

It’s Budget time and many of us will be frantically scouring the budget news for proposals, price hikes and changes that will affect the property business.

House prices could be set for a boost by a multi-million pound stream of buy-to-let investment by institutions, including the biggest insurer in Britain, prompted by an often-overlooked clause in the Budget.

Whilst a lot of attention has been paid to the £250m of new loans made available to help 10,000 first time buyers, less attention has been focused on the reforms to stamp duty for people looking to ‘bulk buy’ residential properties.  Not getting excited yet?  Wait until you see some of the figures.

If the Budget proposals pass into law, the tax bills for institutional investors and other buy to let landlords could be slashed by 80%.  Anybody purchasing a property portfolio of let’s say 100 homes worth an average of £200,000 each following the 6^th April would attract a Stamp Duty charge of 5% of the 20m deal value or £1m.

However, Chancellor George Osborne is proposing a change to the way these taxes are calculated.  The proposal means the rate applied will be based on the average value of the properties concerned and not their total value.  If we use the example given above, because the average price paid for the properties was £200,000, the rate of Duty falls to 1% resulting in a tax bill of £200,000.  That’s some drop!

James Moss, a director at Curzon Investment Property,  said “This will be a huge boost in the private rented sector as it will allow pension funds to buy homes in bulk without any unfair spikes in Stamp Duty.”

That’s an understatement!  When you consider the sums of money that insurance companies and other institutional investors have under their management, any increase in this allocation to residential properties could have a dramatic effect on UK house prices.

Aviva, the biggest insurer in Britain today, has confirmed they are considering setting up a £1bn residential property fund so they can take full advantage of the proposed tax break and other big names are very likely to follow suit.  Some market analysis has suggested that many properties still remain overpriced, but figures show that the rental market has held up despite the recession.

No matter how you look at it, bricks and mortar are still attractive for many institutional and individual investors.  The next few months look set to be interesting and the result on the housing market could be dramatic although don’t expect these changes to occur over night. 
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Localisation – local knowledge moves online

As more of us start our home-buying search online there is a growing need for sources of local information.

The last few years have given us instant access to objective information such as sold house prices, bus routes, school catchment boundaries and distances from shops, restaurants and train stations,  but we now have an appetite to digest the subjective information online as well.

Local Knowledge: Invaluable

Not only do we want to know the house prices trends for the area and what our target property sold for last time around but we want to get a feel for the area itself, and we want to hear it from people who live there.

Internet people call this ‘user generated content’ and it means that we write for each other.  No more do we consult the a restaurant guidebook written by a professional critic but we ‘Google’ the restaurant and read reviews written by other diners.  Word of mouth moves online.

The same applies to local area knowledge.  We want to read what residents are saying about an area to put some depth and colour behind those dull statistics.  Yes there may be 12 restaurants within a 10 minute walk – but are they any good?  Has the map eaten there?  The software? Perhaps the website dropped in for a coffee and croissant?  I don’t think so.

The merging of mobile phones with personal computers has really put the ‘location’ into location-based search.   Rather than typing a postcode into your office based computer you can, in theory, use an ‘app’ on your phone that already knows your exact location – and provides information relevant to it.  You can be standing outside a flat you’re about to view and access the Ofcom score of the local school or read what residents think of the local library.

Property websites have recently woken up to the power of localised information, not only because house-hunters are demanding more access to it, but because the internet’s Chief Whip Google demands it.

In Google’s quest for localization, the search engine has started giving precedence in search results to websites that show that they have local relevance to queries.  This means a search for ‘Hotels in Glasgow’ is less likely to return a list of national hotel booking websites and more likely to return a list of actual hotels in Glasgow, represented by the business’ own website.

Likewise a search for ‘houses for sale in Brighton’ may, in the future, be more likely to reveal the websites of estate agents in Brighton than a national property portal website.

To stay relevant and retain the enormous footfall they (we) receive from property-related search queries, property portals are developing local strategies online.  In Rightmove’s case by developing a place to share local knowledge and reviews: Rightmove Places.  Zoopla were ahead of this game with their AskMe! feature where you can ask and answer location-related questions and their recent acquisition of  houseprices.co.uk will allow them to give customers access to sold house price data from the Land Registry should they so wish.  Personally I could never buy a house without knowing how much the previous owner paid for it.

The property search engine Nestoria has a number of data sources that add flavour to the home search, if not colour – giving census information, healthcare facilities, house price trends, post office locations and other hard facts.

Findaproperty.com have a ‘how far is this from…’ tool allowing you to measure the distance of certain services from a given property.

For property portals serious about catering for the needs of their users, location based information services are more than a nice-to-have feature and not only adds to the experience of the online home-hunter – allowing them to do more of their research in one place – but will attract more home-hunters to the website by capturing more of the home-hunt research queries made in search engines.

For those without the time to do their own research,  a new service called Check The Area uses a nationwide network of retired police officers ‘each tasked with using their local knowledge and investigative skills to research your potential new neighbourhood’.  The service starts at £150 for their bronze package.

Their website claims that ‘ a bad neighbourhood can knock up to £30,000 off the value of your property’.  Friends of mine recently pulled out of purchasing a flat at the 11th hour when they discovered, quite by accident, that the flat above was owned by a charity that re-homed ex-prisoners and recovering drug addicts.  This flat shared an entrance and, stairway and hall and being in their early 60s and planning to retire to this flat my friends didn’t feel safe and backed out of the sale.  Had they commissioned an area search earlier they could have made a significant saving in abortive solicitors’ fees.

If your budget will stretch to it, using a property buying agent can also reveal more about an area than you might have time to find out yourself.  The Association of Property Finders and Buyers Agents could be a good place to start looking for one.

Online forums can also be a great place to get an inside view on an area – many hyper-local forums serving just a postcode or a whole town can reveal what residents are talking about whether it be crime or the local library.

Websites such as Local Mouth, We Love Local and Qype bring together sources of information about an area – as well as providing a forum  for local people to post reviews and comments about their area.

If you know of any good online resources for local knowledge and house hunting research feel free to add them in the comments below.

(The hand-drawn map image in this post is used courtesy of Danny McL.) 
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Buying property at auction

Buying property at a house auction is not for the faint-hearted, ill-prepared or risk-adverse.

That said, its a perfectly viable route to obtaining a house to live in or an investment property at a ‘fair rate’ if you do your homework.  It is possible to pick up a bargain at auction, if you know what you’re doing and have a smattering of luck – but it’s also full of pitfalls for the uninitiated – who can end up getting much more than they bargained for.

Linton Chiswick recently argued that property auctions are the barometer of house prices – giving us an early warning of the direction of prices.  This theory is based on the fact that as I stated earlier, auction prices are very fair – as they very accurately match buyers with sellers in a way that finds the exact highest price that someone is willing to pay for a property.

I looked around an auction property recently – a two bedroom semi-detached bungalow in the Vale of Pewsey needing more than a lick of paint.  At £75,000 guide price (and strategically placed as lot 1) it attracted a lot of attention.  The viewing we attended was characterised by youngsters with mum and dad, probably looking at any which way to get on the ladder – but who were soon frightened off by the sheer amount of work and money needed to get the place into a livable condition.

Our cursory inspection revealed damp walls, outdated electrics,deteriating asbestos gutters (and in the roof), no central heating system and nothing saveable in either kitchen or bathroom.  A lot to take on for a non-tradesam or inexperienced investor or wanna-be homeowner.

House Auctions do have a lot going for them in terms of speed of sale  - with a 20 – 30 day completion period bringing urgency and focus to the legal transfer process that can stretch to weeks and months in ordinary circumstances.

Although, this could all change.   We’ve recently come across the Clear system of preparing the sellers’ legal pack prior to recieving an offer – in theory eliminating the to and fro between conveyancing solicitors and enabling an on the day completion.  We’re watching this novel scheme with interest – one of those ideas that makes you ask ‘why havent we done this before?’

So, if you’re considering buying at auction, do your homework.  Look at some properties, go to a few auctions with no intention of buying.  Read up on the process, and look at opportunities with very critical eye.

This series of short videos from David Sandeman, Managing Director of Auction Information Company EI Group is a good place to start.

There are over 280 Auction Houses in the UK – see our property auctions UK page to see if there’s one near you.

Last year, 2010, also saw the launch of Zoopla online house auctions.  I can’t help but feel that this will become a much more common form of house sales.

After all if people are bidding from out of the room using a mobile phone, why shouldn’t they bid from a computer with the extra security and manageability of online bidding?  This also allows home sellers to extend the period of the auction – perhaps allowing more exposure to interested parties and raising the achievable price?

You may remember an article on this blog nearly two years ago  Neil Singer of Click to Purchase (who offer online auction software services allowing any Estate Agent to offer an Auction service to sellers) argued the case for online auctions becoming the norm.  It’s not now seeming as ‘revolutionary’ as it once did. 
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Politicians have no idea about housing

Politicians have no idea about housing, so said the press yesterday morning. Why should they, it’s a market?

No one has really got any idea, so disparate is our market, and with Labour admitting they got it wrong and CLG carrying out a review of the private housing market it’s perhaps time for everyone to go back to encouraging people to move and to stop hand wringing.

Ultimately various Governments have failingly addressed the supply side of the market, and they’ve periodically tried to encourage the demand side with the resulting boom and busts. So sensitive are homeowners as voters that it wouldn’t be that prescient to suggest that interest rates are watched more for their effect on the housing market than they are for Industry or anything else.

If it is that important why is there so little attention given to keeping the wheels oiled. It’s been an immutable law that as Stamp Duty has gone up so the volume of sales has gone down. The plethora of amateur (and apart from the Land Registry that’s all they are) commentators can say what they like about whatever sector but volumes continue to fall and we’re about to get another cynical rise that’s going to lead to a further contraction.

Is it really that much of a leap of faith for the Coalition to accept that the best way they can free us the supply side of the property market is to put Stamp Duty where it should be, at 1%? There’s little doubt prices would come down in the short term but those voters they help move and get on the ladder would, I’m sure, be eternally grateful.

Ed Mead is a regular contributor to The Big Property List blog.  An Estate Agent for over 30 years, he has been writing and commentating on the market for over half of that as the Sunday Times Property Expert and The Agent Provocateur for the Telegraph.  He sits on the Board of The Property Ombudsman Ltd, has a regular LBC slot, and is happy to say it as it is.

Other places you can find him online are the Douglas & Gordon blog and Twitter

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Ed Mead is carrying the Olympic torch (not literally)

For many who spent the tail end of last year trying to predict this year it must have seemed a doddle compared to forecasting now. Suddenly the press, and even me, are beginning to sense that although the year may be a dreadful dirge, it does look as if prices in London will end the year higher than they started. This is not saying a whole lot but from where I’m sitting there are occasional deals being done that simply beggar belief, whereas if you wander out of London, particularly in a Northerly direction, the stories are of a very different nature as the press are keen to let us know.

Sadly all commentators agree that volumes will be a victim this year, and many fear this malaise will continue into next year which is depressing. But hang on a minute next year is Olympic year isn’t it?  We’re all supposed to feel good about that, and I’ve even registered for tickets as any self respecting Londoner should, but will it be enough to dispel the fog.

One thing everyone forecast, and the auspices loom good, is that rental numbers will increase in London next year because of the 2012 Olympics being here. With perhaps the worst area for sales currently being small flats, no demand from first time buyers still, it’s very likely, and beginning to be the case, that buy to let investors are beginning to lick their lips and dive in.  I sat in a meeting with some heavyweight agents yesterday and all the ones I spoke to said if they had money they’d be buying investment property now.  The fact that they can’t shows the general level of nervousness and lack of income in the estate agency game at the moment, but perhaps whilst many top end agents gloat about how many £5m plus properties are selling those who deal at the bottom end might just be about to get their own timely boost.

Ed Mead is a regular contributor to The Big Property List blog.  An Estate Agent for over 30 years, he has been writing and commentating on the market for over half of that as the Sunday Times Property Expert and The Agent Provocateur for the Telegraph.  He sits on the Board of The Property Ombudsman Ltd, has a regular LBC slot, and is happy to say it as it is.

Other places you can find him online are the Douglas & Gordon blog and Twitter 
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