The UK is obsessed with house prices and there are at least five main indices measuring property values. . Today, most of these indices show the market is weakening, with property prices coming under pressure from high interest rates and squeezed consumer budgets (both side effects of skyrocketing inflation).
There are five main indices that are regularly quoted in the media – Nationwide, Halifax, the Office for National Statistics, Zoopla and Rightmove. On top of that, there are lesser-known indices such as Hometrack and the Royal Institution of Chartered Surveyors.
But the figures can be confusing, with some showing monthly growth but annual falls, while there can also be differences depending on the type of property or the region.
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So how do they differ and what does each one measure?
Nationwide House Price Index
The Nationwide House Price Index is one of the most popular indices used in the UK, with data stretching back to 1952.
The data used is the lender’s valuation at the mortgage approval stage – these may differ from the actual sale price, but the idea is that this is near enough to the end of the home-selling process to be a more realistic snapshot than the initial asking prices (such as are used in the Rightmove index – see below).
The index is “mix-adjusted”, which means it tracks a representative home by giving a relative weight given to each property based on its characteristics, such as, for example, the number of bedrooms. The index uses a statistical process called hedonic regression to “relate observed combinations of these characteristics to the house purchase price”, the company says. This prevents price disparities caused by different types of properties being sold each month.
Latest figures: House prices fell 0.9% month-on-month and 3.3% year-on-year during October. The average price of a house stands at £259,423.
Halifax House Price Index
Halifax’s House Price Index has data going back to 1983 and, like the Nationwide index, is based on the bank’s valuation at the mortgage approval stage. The index hits its 40-year anniversary this year, with house prices up 974% since early 1983, when it began recording data.
A standardised house price is calculated using this data and property price movements on a like-for-like basis are analysed over time.
Latest figures: House prices fell 1.1% month-on-month in October and 3.2% year-on-year. The average property costs £281,974.
Rightmove House Price Index
Rightmove’s house-price index differs from both the Nationwide and Halifax indices in that it is based on asking prices – i.e, the price that sellers list their properties at – of 90% of properties for sale listed on its website. This is one of the very first stages of the home-buying process. The index also excludes inner London.
One obvious advantage of the approach of using ask prices to calculate house prices is that buyers can spot price trends early on. But asking prices can drastically differ from the prices at which houses are eventually sold.
“The main issue with the Rightmove index is its immediate volatility and mirroring of market sentiment rather than solid data. For example, if the housing market is bullish, the index will rise as sellers try to wrestle every penny out of their sales,” says London estate agent Petty Son & Prestwich.
There is also, of course, no guarantee that a listed house will sell. There is every chance the seller may withdraw the property and sell it at a later date.
It is also worth checking the house price report for data on discounts and how soon properties are going under offer to give you an idea of the health of the property market.
Latest Figures: Average asking prices fell 1.7% month-on-month in November – the largest drop for this time of year since 2018. Asking prices also fell 1.3% annually. The average asking price is currently £362,143.
ONS/Land Registry House Price Index
The UK House Price Index (HPI) is calculated by the Office for National Statistics and uses house sale data from HM Land Registry, Land and Property Services Northern Ireland, and Registers of Scotland.
The ONS index uses a statistical method called hedonic regression that adjusts the data so it takes account of the characteristics of a property such as the number of bedrooms rather than focusing solely on price.
Unlike the Halifax and Nationwide indices, which are based on mortgage approvals by the landers, the ONS data also includes cash purchases so gives a broader view of the market.
The index does have a time lag though of at least two months due to how long it takes to process submissions from conveyancers to the Land Registry once a sale completes.
Latest figures: House prices rose 0.2% year-on-year in August – the lowest annual rate for the month since 2012. The average property costs £291,000, which is little changed from 12 months ago but £9,000 above the recent low point in March 2023.
Zoopla House Price Index
The Zoopla house price index uses sold prices, mortgage valuations, and data for agreed sales to calculate house prices for any given month.
In other words, the Zoopla house price index tracks achieved prices, which is a key difference from an asking price index.
Tracking homes that are 'sold subject to contract' is a better indicator of current house prices, as the asking price might not reflect the sale price.
The index also provides data on the number of days it takes to sell a house, giving prospective sellers an idea of how long it will take for the property to sell. This measures the time from the initial listing to going under offer.
Unfortunately, Zoopla’s index, like all other indices on this list, relies on a limited pool of data with some degree of time lag.
Latest figures: House prices dropped 1.1% year-on-year in October, with house prices averaging £264,900. That compares with a 9.6% rise a year ago.
UK Residential Market Survey by RICS
The UK Residential Market Survey by the Royal Institution of Chartered Surveyors (RICS) is very different to all other indicators on this list. It is a monthly sentiment survey of chartered surveyors operating in the residential sales and lettings markets.
It measures the percentage of surveyors reporting house price increases versus declines. While it doesn't provide an average house price for a specific month, it serves as an indicator of current and future conditions in the UK residential sales and lettings markets.
Surveyors are asked 18 questions on various metrics, such as sales, enquiries, listings, and house prices, and are required to report whether these have increased, remained the same or decreased.
A positive net balance indicates that more surveyors are observing price increases, signalling a strong housing market. Conversely, a negative net balance suggests that more surveyors are witnessing price decreases, indicating a more fragile housing market.
For instance, if 15% of surveyors reported an increase in buyer inquiries and 20% reported a decrease, the net balance would be -5%.
Latest figures: The RICS Residential Market Survey’s headline new buyer enquiries figures recorded a reading of -28% in October, compared with -37% in September. The index also remains negative on metrics such as agreed sales, new instructions and house prices.
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