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The Most Accurate UK House Price Index Revealed

Stephen Hart

Stephen Hart

Founder - Cardswitcher

Former - Chief Financial Officer @ Worldpay

Despite the current cost-of-living crisis and soaring mortgage rates when stepping on the property ladder is becoming more difficult, most people in the U.K. still aspire to own a home.

Given the British love affair with property, it’s little wonder that the U.K. has more than four major indices tracking house prices. 

Buying a home, or getting into the business of developing property is a major financial endeavour. Studying the market, including the house price indices, though, will make it a little less daunting.  

But with so many different measures available, how is it possible to decide which house price index (HPI) is the best? In this guide, we feature the major house price indices, their advantages and drawbacks to help you decide which ones to factor into your financial decision. 

What Are the Major U.K. House Price Indices

The main UK house price indices that most property professionals look at are the following: 

  • The UK House Price Index 
  • The Halifax House Price Index
  • The Nationwide House Price Index
  • The Rightmove Asking Price Index

Some people also follow some lesser-known house price indicators, such as those compiled by Zoopla, Hometrack, and the Royal Institution of Chartered Surveyors (RICS). Our analysis covers the four gauges mentioned above. 

The Pros and Cons of Each Housing Price Index 

Let’s take a quick glance at the main attributes of the four main HPIs:

UK HPIHalifax HPINationwide HPIRightmove
Data sourceUK Land Registry Mortgage approvalsMortgage approvalsAdvertised prices on website
Sample sizeAbout 100,000About 15,000About 12,000Up to 200,000
CoverageUK-wideUK-wideUK-wideEngland, Scotland and Wales
Speed of publication6 weeks from registrationOne weekOne weekSame month

Source: UK Government, Provide Finance research

The UK House Price Index – Best for Accuracy of Actual Sold Prices

Compiled by the HM Land Registry, the Office for National Statistics, and the land registries of Scotland and Northern Ireland, the UK HPI is the government’s official house price index. 

As it’s based on sales prices at the property registration stage, it most accurately reflects actual house prices, which works best for analysing long-term trends. 

Also, it’s the most comprehensive index. Unlike the indices that are based on mortgage approvals (Halifax, Nationwide), the UK House Price Index, also takes into account cash transactions. About 30% to 40% of sales are completed as cash purchases, according to the government. 

One major drawback is that the UK HPI is a lagging indicator. This means that it takes about six weeks for a registered transaction to appear in the index. The UK HPI is reported every month, but for instance, the reference period for the report published in January will be November. 

The Halifax House Price Index – Best for a Snapshot of the Housing Market

Halifax, the U.K.’s biggest mortgage provider and a part of Lloyd’s Banking Group, began compiling its HPI in 1983, and it’s one of the oldest providers of housing market prices. 

It draws its data from its mortgage approvals, following the valuation stage, and as it’s a sizeable market player, that gives it a respectable sample size. Unlike its competitor, Nationwide, it includes both owner-occupied and buy-to-let mortgages in its index. 

It publishes its HPI within a week following the end of the reference month, so it gives a fresh insight into the market. 

The main downside of the Halifax HPI is that it doesn’t take into account cash transactions, and properties bought with bridging finance, and, therefore doesn’t reflect the entirety of the housing market. 

The Nationwide House Price Index – Best for Crosschecking Other Indicators 

Another popular provider of housing price data, Nationwide is the U.K.’s second-biggest mortgage lender with a 12% market share, and its housing price index has roots going back to 1952. 

The main difference between the Nationwide HPI and Halifax’s is that it only includes owner-occupied houses and excludes buy-to-let properties, giving it a different sample. 

Similarly to the Halifax HPI, Nationwide gives a very quick snapshot of the state of the housing market, releasing its monthly index within a few days on either side of the last day of the reference month and the quarterly index at the end of each quarter.

The Rightmove Asking Price Index – Best for Gauging the Direction of the Market 

Rightmove, the market-leading property portal, which claims to cover more than 90% of properties for sale, compiles its index based on advertised prices on its platform. 

As listing a property is the first step in the sale process, the biggest benefit of Rightmove’s indicator is that it gives the earliest indication of market trends and can show a change in sentiment quickly – a heating up or cooling of the property market. 

While it boasts to draw on as big a sample as the UK HPI, its biggest drawback is that its price levels are less accurate, as more often than not, homes sell for a lower or higher price than the asking price, depending on the market conditions. Sometimes, they might not sell in the period in which they are included in the index. 

The Final Word on the Accuracy of the Main U.K. HPIs

While the UK HPI is the most accurate when it comes the the actual prices of completed property transactions, due to the delay in reporting, it’s most useful for verifying house price levels and trends retroactively. 

For the best indication of current market prices that will be in the right ballpark, both the Halifax and the Nationwide HPIs are useful. The Rightmove report will give the best early indication of the housing market heating up or cooling down. 

Why Should Homeowners and Investors Follow the HPIs

Buying a home, a buy-to-let property, or arranging the financing for property development is a sophisticated financial exercise. This is why everybody entering or already involved in the housing market needs to do some background research to make the necessary financial calculations.  

The HPIs and the providers’ reports are among the best valuation tools homeowners, landlords, and home developers can use to keep abreast of price trends. To make the right investment decision and secure financing at a reasonable cost, it’s essential to be able to predict where the property market is heading and adjust their plans or business strategies accordingly.

The Implications of Inflation for Property Developers

By studying the various housing price indices, property developers can gain valuable insight into how property prices are faring in the current environment of historically high inflation rates. 

While real estate investments are traditionally considered as a hedge against inflation, there is a real danger that your investment will fail to keep up with inflation and lose value in inflation-adjusted terms and erode the purchasing power of your capital. 

‘’Instead of a one-size-fits-all approach, property developers need laser focus to secure returns that are inflation proof,’’ Miranda Khadr, Provide Finance’s founder and CEO, said. “Investors need tailored strategies based on location, property and ownership type, along with personalised financing options. If inflation is here to stay, savvy developers will adapt by carefully choosing where and how they invest their money.”

The effects of an inflationary environment on property developers are three-fold: 

  • Project cost: With rising inflation all the factors in the valuation of the project, such as the cost of construction materials, labour, and following completion, the costs of running and maintaining the property will go up. 
  • Financing costs: As central banks raise interest rates in to curb inflation, borrowing costs for real estate developers will increase, which will affect the affordaibility of mortgages, leaving the developer with less financial fire-power, restricting their investment options. 
  • Rental income: If the developer draws rental income from the property following the completion of the project, they might not be able to raise rents in line with inflation due to the tenants’ purchasing power being squeezed. 

Inflation certainly poses challenges, but by understanding the implications, and proactively adapting your strategies, you can successfully safeguard the value of your capital.

Photo by Tierra Mallorca on Unsplash

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Written by:
Stephen Hart

Stephen Hart

Founder - Cardswitcher

Former - Chief Financial Officer @ Worldpay

Stephen brings a wealth of experience honed through years in the financial sector, particularly in the card processing payments industry. His illustrious career spans key roles at PwC, Natwest, and the role of CFO at WorldPay, before going on to found card processing comparison site, CardSwitcher. He is passionate about helping growing businesses to understand the card processing landscape so they can make savvy financial decisions.