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Nationwide vs Land Registry HPI


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How accurate is the Nationwide Building Soc HPI [which is more timely] versus the Land Registry HPI [a lagging indicator]? How accurately, if at all, can the Nationwide Data predict the LR data?

For instance Nationwide will release their data for any given month at the end of that month or start of the next month, whereas Land Registry will release it 2 months after that said month. I think this is fairly common knowledge. 

Some differences though in both HPI's as they are complied and reported very differently.

  • Nationwide only obtains data from its mortgage approvals, so doesn't include any cash [i.e non mortgaged] purchases, and not all approvals result in purchases.
  • Cash purchases account for roughly 30-40% of all property transactions.
  • Nationwide mortgage lending accounts for around 12,000 property transactions per month.

 

  • Land Registry uses data from the registration of sale often just called sold prices.
  • Accounts for around 100,000 transactions per month.
  • Generally seen as more authoritative. 

More info on the indices can be found on the .gov site

 

Monthly % change in house prices:

image.thumb.png.39453b45632dd0b47a114063ea74a8b5.png

 

Annual change in House Prices:

image.thumb.png.225bcb7e7633de60ece1656e4a3fa5eb.png

 

Typically what is found is the annual % change data from Nationwide (shown in blue) is usually below that of the Land Registry (shown in red). So when Nationwide releases it HPI, more often than not, expect the L.R data to come in over that figure.

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Interesting post

1. If the data were the same, the lag would be clearly visible in the charts and you could find the max of the cross-correlation to find the lag (which would be 2 months). You could do it on this data, and the lag should be 2 months if the data matches closely.

2. Nationwide mortgages are a subset of all mortgages. Their mortgage marketshare may not closely represent the mortgage market as a whole. i.e the 12,000 nationwide mortgage approvals is not a random sample of all mortgage approvals/100,000 land registry data points. I suspect Nationwide approve relatively lower value mortgages than other lenders, I cannot substantiate this claim though.

3. Land Registry data may not be compiled from only sold prices. It may be compiled from any transaction event such as first registration or value at probate. Would need to check on this.

Can you post the links to the data sources, and I'll have a look more thoroughly. I think you need to know more about the limitations of the datasets.

You could make your own HPI indicator with the raw HMLR data.

 

You can most definitely predict the HMLR monthly HPI figure based on the Nationwide data. The first step you would want to do is remove the lag (i.e. check it really is 2 months), then calculate the joint distribution of NW,HMLR so that you can then get P(HMLR=x|NW=y), for example: What is the probability that the monthly HMLR HPI is 1% given the NW HPI is 0.7%. You would then plot P(HMLR=1.0|NW=0.7) to get this figure. You would plot the distribution of P(HMLR|NW=0.7) and take the mean as your indicator, subject to some confidence interval. So you will be able to say: If the NW HPI figure was 0.7% for August 2021 then there is 95% confidence that the HMLR HPI figure for August 2021 will be between 0.9-1.1%.

 

You should also consider self-predicting the HMLR data with ARMA models, possibly this would give you better results especially if there is some clear periodic signal in the data. Maybe even some machine learning techniques would be useful here.

 

Is there are reason you want to be able to predict this?

 

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On 04/08/2021 at 19:39, Notting Hell said:

Nationwide mortgages are a subset of all mortgages. Their mortgage marketshare may not closely represent the mortgage market as a whole. i.e the 12,000 nationwide mortgage approvals is not a random sample of all mortgage approvals/100,000 land registry data points. I suspect Nationwide approve relatively lower value mortgages than other lenders, I cannot substantiate this claim though.

Yes you're right, I believe Nationwide makes up around 20% of the total mortgage market and Halifax, 8%.

 

On 04/08/2021 at 19:39, Notting Hell said:

Can you post the links to the data sources, and I'll have a look more thoroughly. I think you need to know more about the limitations of the datasets.

 

Yes sure;

https://landregistry.data.gov.uk/app/ukhpi/browse?from=2020-06-01&location=http%3A%2F%2Flandregistry.data.gov.uk%2Fid%2Fregion%2Funited-kingdom&to=2021-06-01&lang=en

https://www.nationwidehousepriceindex.co.uk/resources/f/uk-data-series

On 04/08/2021 at 19:39, Notting Hell said:

You would plot the distribution of P(HMLR|NW=0.7) and take the mean as your indicator

Im with you and we could show that 'range' like this:

image.png.4c21eee50f333b18b4491a072a19fcf0.png 

 

On 04/08/2021 at 19:39, Notting Hell said:

Is there are reason you want to be able to predict this?

 

None, other than purely to compare the two data sets, see if there is any correlation and then whether we could say (and with what % accuracy) what the LR figure will be. 

Furthering that, using mortgage approval data to predict HP's in the same way as above would be very interesting too. 

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