But average house price indices should be taken with a large vat of salt, because they are completely irrelevant to the values of many UK homes.
Indeed, the all-time high figure reported will have seemed staggering to many people up and down the country, when the housing market on their doorstep is definitely still in the doldrums.
So what's the real story?
Fact or fiction?
Rightmove said last week that prices were at a record £243,737, beating the previous high of 2008. However, the property portal's index is of 'asking prices' not sold prices, which are two quite different things.
After all, you can ask whatever you want for your property, but it doesn't mean that somebody will offer to pay that amount. And it has been widely recognised in many areas of the UK that there is still reluctance on the part of many sellers to accept that their property is not worth the price they want.
In addition, when the amount of stock for sale is low – as it is currently is - some estate agents are motivated to 'value for instruction', meaning they tell a seller their house will go for an inflated price in order to get their business. They work on the basis that if you want to sell your home and you visit three agents, you will instruct the one who values your house the highest.
Of course, Rightmove's index does still have some value, because there is a correlation between asking prices and sold prices. It also gives an immediate snapshot of the market right now, and can be a precursor to trends in actual sold prices.
But with so many different house price indices – at least half a dozen a month in addition to all the quarterly reports – many people are left totally confused, especially when they often contradict each other.
Up or down?
In the last month for example we have had the following reports:
- Rightmove said prices hit an all-time high of £243,737 in April
- Zoopla said prices fell by 1.7% to £215,436 in the first quarter of 2012
- The Office for National Statistics said the average price was up 0.2% on the year to £224,473 in February
- Nationwide said that prices fell in March to £163,327
- Halifax said they rose 2.2% in March to £163,803.
And that is by no means an exhaustive list! But why are they all so different?
Measure by measure
1. House price indices are collated by different organisations, from Government departments to mortgage lenders, so are bound to have different figures. Lenders, for example, only use data from their own clients, who may or may not represent the entire market. A small sample size is then extrapolated to represent the whole market.
2. They pinpoint different stages of the property purchase process. Rightmove records asking prices (which may be different to the price paid), the lenders look at prices agreed at the mortgage offer stage (many of which will fall through), and the Land Registry looks the price paid and registered with them (which occurs after the sale so lags behind what is happening right now.
3. Many use seasonal adjustments to account for traditionally busy or quiet periods. These are different and completely confuse matters. The last Nationwide price index said that house prices fell in March, despite showing that the average house price it records on its index had actually risen. This is because of its seasonal adjustment which aims to smooth out the year and enable fair comparisons. But the system is clearly flawed.
4. The UK housing market is not homogeneous, it's diverse, and average prices just don't cut it. Recent figures are heavily skewed by the current London housing boom. Even Rightmove's 'all-time high' report admitted that prices actually fell in the rest of the UK excluding London over the same period. As Mark Harris, chief executive of broker SPF Private Clients, says: "There is no such thing as a single national housing market so indices that talk about 'average' house prices should be regarded with caution. They are interesting in terms of a general indication of the health of the market but regional differences can be significant."
5. Low transaction levels completely skew the market. The smaller a sample size the less likely it will really yield any representative results. And with purchase transactions significantly down on pre-crunch levels, any monthly anomalies in the data collected by a particular index (such as a rash of big value sales in the capital) can significantly alter the figures. Andrew Montlake, director of mortgage advisers Coreco, says: "The problem with house price indices is that in a market where transactions are low even a small change looks bigger than it actually is and figures can easily be skewed, especially on a month-by-month basis. Consumers have every right to feel confused."
6. Finally, one of the reasons that the indices are contradicting each other so much is because they are actually reporting very small movements around 'zero change', such as an annual fall of 0.2%, or a rise of 0.3%. In reality, overall UK prices (not including London) are not moving much one way or another. But, of course, that doesn't make such a good headline!
So how do you work out what is really happening to house prices in your area? After all, if you are looking to buy or sell it is something you will be keen to know.
Montlake suggests simply looking closer to home: "It is usually much more accurate to speak to a handful of estate agents in your local area and ask what properties there have actually sold for in the past month or two. Taking an average of their answers will give you a more meaningful picture of what is relevant to you rather than listening to official indices."