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For those of you feeling down regarding the Halifax figures, this is an email I received this morning from money morning.

- We open Wednesday’s Money Morning with dire warnings

about falling house prices and what happens? The

Halifax comes out and says property prices in August

rose by the most in almost a year, up 1.6% on July.

- Annual growth was just 2.5%, but that was still up on

July’s rate of 2.3%.

- So do we eat humble pie? Is this where we turn

around, call the bottom of the market and tell you to

buy as much UK property as you can possibly get your

hands on?

- No. This is where we delve into the black arts of

house price statistics and point out why the Halifax is

talking tripe.

- For a start, Halifax is way out of line with other

reports for August - Nationwide and Rightmove have

already said prices fell 0.2%, while Hometrack reckoned


- But why is there all this diversity between

statistics that are meant to measure the same thing in

the first place?

- Capital Economics, who agree that the Halifax data

looks “too good to be true”, point to the gulf between

data based on actual house sales (Halifax, Nationwide)

and data based on surveys of estate agents and

surveyors (Hometrack, RICS).

- Sales-based reports still indicate prices are higher

than last year, albeit not by much. But surveys have

pointed to persistent monthly falls over the past year

or so.

- Geographical coverage (sales-based data includes

Scotland and Northern Ireland, where house prices have

been among the last to weaken) accounts for some of the

difference. But the think tank also believes that

sales-based data is less efficient at detecting turning

points in the market. Why?

- Imagine you’re buying a house in early 2004. It’s the

middle of a boom, you’re panicking. There’s only one

property for sale in your dream street. It’s a one-bed

flat with a hot pink carpet and a weird smell, but you

know if you don’t buy it today for £100,000, then

someone else will snap it up tomorrow. And it’s going

to be worth 10% more in six months, so does it matter?

You buy it and resolve to do something about the


- Now imagine you’re buying in early 2005, as the

slowdown becomes entrenched. There are several

properties for sale in your desired street. The one-bed

flat with the hot pink carpet has been sitting empty

for six months and is now going for £90,000. A south-

facing one-bed with restored wooden floorboards across

the road has just come on the market priced at

£105,000. But you like the ‘feel’ of the other place

and reckon it’ll hold its value better – and you don’t

need to get rid of the carpet. So you pick quality over


- The Halifax and Nationwide data don’t pick up on the

difference in quality between the properties, nor do

they include the fact that the poorer quality property

is now on the market for less money. They just see a

one-bed flat selling for £5,000 more than a similar

one-bed sold for the previous year. Therefore, prices

must have gone up.

- So the reason for the gap is that sales-focused

reports don’t immediately pick up on the falling prices

of low quality properties, which take much longer to

sell as the slowdown hits and buyers can have their

pick of homes. On the other hand, surveys of estate

agents and surveyors give a better picture of the

broader market, and so have been gloomier.

- Of course, as supply continues to outstrip demand,

and people become more worried about the market, high

quality properties will suffer too, so eventually the

Halifax and Nationwide will catch up.

- But in the meantime, expect further monthly


- And if you still think we’re too bearish on house

prices, why not ask a housebuilder? Wilson Bowden

became the third UK housebuilder this week to report a

plunge in house sales for the first half of the year.

Despite having 16% more sales outlets open than in

2004, sales fell 9%, while average selling price slid

8%. “These have been the most difficult trading

conditions the market has seen for a decade”, said

chairman David Wilson.

- Staggeringly, shares in the group closed up 3% at

£11.55, because results weren’t as bad as the City

expected. This sort of mindless optimism – something to

with the summer heat, perhaps? - seems to be sweeping

the market.

- Another beneficiary from the syndrome was electrical

retailer Dixons. The high street is under siege, and

companies such as Dixons which sell household goods

such as plasma screen TVs and washing machines are

feeling the pain even more sharply than the rest.

- Underlying UK sales fell 7% over the summer months.

Sales at its PC World chain dropped 7%, while mobile

phone store The Link saw sales plunge a full 28%.

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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