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El_Pirata

Benchmark Housing Index?

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I don't know much about houses but I do know a bit about oil.

When people talk about the price of oil they don't actually mean the price of all oil, the mean the price of a particular type of oil that is used as a reference price. If you calculated the average of every different cargo of oil that had been sold each day, it actually wouldn't help too much to understand what is happening with oil in the short term. In the long term, it would show a trend. But it would still be a muddy picture, because different grades of oil trade each day. So you're not comparing like with like.

Now this is kind of the way that we look at the housing market at the moment. We take prices of sales of all different types of houses from all different parts of the country, assume that they are one single market, and find the average. There are some crude statistical attempts at mix adjustment and seasonal adjustment, but these can just muddy the water further. And this methodology (Rightmove excepted) ignores the houses that are being priced lower and lower but just not selling. (Rightmove has the converse problem, that it allows sellers to "offer up" the market).

The oil markets have evolved, and are still evolving, benchmarks. The most commonly know of these are Brent and West Texas Intermediate. Both of these grades represent fraction of global crude production. But they allow you to see what is happening to oil as a complex, as you are always comparing like with like.

What is needed for a successful benchmark?

* A uniform grade

* Liquidity

* Transparency

Would it be possible to construct a benchmark house price index to give us a clearer idea of what is happening in the market in real time?

First we would need to choose are particular type of property which is fairly uniform in quality, and has a high number of transactions, or at least market activity. I would suggest 2BR purpose built flats. Most are fairly recent builds, so you do not have the kind of quality premium/discount and other complications associated with period properties. As they are standard BTL-fodder, market activity is fairly liquid, there is more buying and selling going on than for other types of property (I assume). You could get round the size problem by working out the price by square metre or foot for each transaction/offer.

Now here's a trickier bit. To make it feasible, you would have to choose a certain geographical area, probably fairly small, but one you thought that would serve as an accurate indicator of what's going on in the wider market. Perhaps this could be a certain part of London, or somewhere totally different, I don't know.

Now how would it be possible to monitor offers and transactions in the area chosen? Via websites like Rightmove? This would give us offers but not transactions. Is there anyway of getting transaction data faster than the LR (and accurate transaction data, taking into account cashbacks etc).

Anyway it's just a random idea, I would welcome suggestions or feedback

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Guest muttley

Good post,but I'm afraid I can't offer an answer. :(

What you have shown is that the figures are not to be trusted as it is almost impossible to compare like with like.

We all seem to get hung up on figures here,but nobody's sure what they mean.

I'd rather hear an anecdotal any day!

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Good post,but I'm afraid I can't offer an answer. :(

What you have shown is that the figures are not to be trusted as it is almost impossible to compare like with like.

We all seem to get hung up on figures here,but nobody's sure what they mean.

I'd rather hear an anecdotal any day!

Me too. The great thing about anecdotals is that they fill in the gaps in the data - ie what is not selling

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But they allow you to see what is happening to oil as a complex, as you are always comparing like with like.

What is needed for a successful benchmark?

* A uniform grade

* Liquidity

* Transparency

Anyway it's just a random idea, I would welcome suggestions or feedback

Dont be silly. We already have something with a heading that says "Average House Price".

What more do you want?

R Move

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Because the 'average house price' can be skewed upwards if theres a slowdown in FTB-sized starter homes / flats, a weighted benchmark would be a good idea.

Maybe the mean of: 3 flats (<800 sq ft) + 3 terraces (<1000 sq ft) + 2 semis (<1500 sq ft) + 1 detached (<2500 sq ft) in a given area (or whatever the typical ratio of flats:semis:detached is accross the UK)

To be fair, the BBC website lists house prices broken down by type and local authority

Edited by tonification

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Would it be possible to construct a benchmark house price index to give us a clearer idea of what is happening in the market in real time?

First we would need to choose are particular type of property which is fairly uniform in quality, and has a high number of transactions, or at least market activity. I would suggest 2BR purpose built flats. Most are fairly recent builds, so you do not have the kind of quality premium/discount and other complications associated with period properties. As they are standard BTL-fodder, market activity is fairly liquid, there is more buying and selling going on than for other types of property (I assume). You could get round the size problem by working out the price by square metre or foot for each transaction/offer.

Is there anyway of getting transaction data faster than the LR (and accurate transaction data, taking into account cashbacks etc).

I think this is a great idea and HPCers could do this.

Not only that but 2BR newbuilds would be ideal as they should all be of the same quality.

Nevertheless you have hit the problem straight away. Getting accurate transaction data is the problem with this type of build.

As far as I know, unless you can trust the buyer to tell you how much they paid for a property the land registry is the only source of data on actual transactions.

What is worse is that details of transactions do not always reach the land registry or get published and those that do are often listed inaccurately.

I have lost track of the number of times I have seen an apparently very cheap house in my area only to realise that it is actually a flat that has been wrongly listed.

The same goes for a sale of a detached house being listed in a house that I know has only terraced houses, so that even an end of terrace could only be described as semi-detached.

If anyone does have access to more accurate data I would love to hear about it.

I don't often post about house prices in my area for all the reasons given above and not least because as the vast majority of houses in this area are edwardian or victorian the condition of the house can cause price variations that can mask underlying trends in the direction of house prices.

Again, any suggestions on how to get round this would be appreciated.

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If somebody had the time and was really interested, they could choose a small area and ring round the local estate agents once a week or once a month and ask if they have sold any 2BR flats, if not what are the offer prices at the moment etc. Pretty labour intensive though!

Believe it or not, that is pretty much how prices for oil cargoes are assessed. The price reporting agencies ring round all the brokers and traders each day and ask what has been traded. If nothing has been traded then it is up to their judgement what the price should be. The prices they then print at the end of the day are then the reference price for billions of dollars of term contracts! Incredible when you think about it, but the price you pay for petrol is essentially decided by journalists.

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A few reports if you are interested: start with the BIS one as an intro.

What you are advocating is basically the repeat sales method.

Using sites like UpMyStreet it is possible to get local Land Registry data a month at a time, without waiting for the quarterly report. You can then compile data on a particular postcode or street etc.

Unfortunately new build is especially prone to discounts which aren't reflected in the Land Regisry data. Dr Bubb had a thread about this, and an accountant on Singing Pig was often seeing discounts of 10-25%, and one of 30%, and to repeat, these were NOT reflected in the Land Registry data. (Hopefully if he reads this he can add the link so I don't have to wade through 40 pages trying to find it.) Discounting is sufficiently common at the moment to cause the third largest buy-to-let mortgage provider (Portman) to pull out of the new build market at the start of December, stating valuation has become an art not a science: they are not being told about discounts offered by builders, and as a result are being left with 100% of the equity (and the risk) instead of there being the 15% deposit expected. See:

http://firstrung.co.uk/articles.asp?pageid...=1028&cat=1-0-0

Note Land Registry data is fairly basic, and I don't think it extends to floor area. Perhaps you are beginning to realise why acedemic researchers are less than satisfied with our current house price indicies...

This thread I started will also give you more info about survey methods:

http://www.housepricecrash.co.uk/forum/ind...showtopic=22791

House_20Price_20Indices.pdf

BIS_UK_house_price_surveys_only.pdf

House_20Price_20Indices.pdf

BIS_UK_house_price_surveys_only.pdf

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  • 301 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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