Monday, August 13, 2007

House price rises double in just one month

House price rises double in just one month

The housing market raced ahead during June with annual price growth running at its highest level for more than two years, Government figures showed today.

Posted by david20040_0 @ 05:48 PM (676 views)
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41 thoughts on “House price rises double in just one month

  • david20040_0 says:

    Slowdown? Crash?

    Have I missed something, the annual increases just keep going up and up.

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  • Without even reading the report I surmise…

    asking prices, not selling prices.

    Combine this with a total lack of FTB, fewer sales than previously, and I guess it is the multi-millionaires buying at any price because it’s never going to affect them anyway, combined with some real idiot BTL who don’t realsie the game is over.

    Sounds like the start of a crash to me.

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  • david20040_0 says:

    Start of the crash, are you deluding yourself?

    The selling prices, not the asking go up 4k in one month and that signals the start of the crash?

    What? That completely defies logic.

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  • sold 2 rent 1 says:

    House prices will carry on rising until the end of the year.
    LSR predicted 15% for 2007 and they are the best predictors.
    Their availability index is well into the danger zone now and will reach crash levels in early 2008.

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  • david20040_0 says:

    Oh right so the great ‘crash’ is now being pushed back yet again!

    You ever get the feeling like I do that no matter how much I want this crash to happen it never will.

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  • This report is junes data.. things started to turn in July.. this is no surprise and of no real relevance!!

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  • captain sensible says:

    Asset bubbles tend to have late rallys before the inevitable crash (‘muppet rally’ one commentator helpfully called it). Far more important than newspaper spin is the number of properties being sold – Land Registry figures are the only reliable source. Rising prices from a small number of sales means nothing. If these figures are generated from the ‘normal’ number of sales for the time of year then I guess that peoples willingness to take on debt hasn’t yet dried up and the rising market will hold out for a little longer.

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  • I’m not sure why some people expect predictions of market turning points to the precise day. It is clear that the interest rate trend is up not down. It is clear there are concerns over a global credit crunch. It is well known interest rate effects lag changes by approx 12 months. BTL yields are much less than IRs therefore anyone buying in the last few years with high LTV will be paying for their mortgage with cash. Cheap fixed IR deals are only just starting to expire. All these indicate more expensive mortgages and a downward trend in real house prices in the next few years. Which day they turn down is anyone’s guess, although in many parts of the country real prices are now falling already. London-centric people may do well to look outside of Kensington and Chelsea.

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  • @david20040_0

    “Have I missed something, the annual increases just keep going up and up.”

    Yes, the appetite for debt does seem to be insatiable. When I speak with friends at work, they seem confident that the housing market is fine. I really don’t think most people have a clue – that is why prices are rising.

    Maybe in 2008, we’ll see some sense … I keep telling myself.

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  • Ihopeitgoeswithabang says:

    Statistically for the last 40 years it always has done. Thats all the evidence anyone will ever need.

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  • I think most people here realise that the more the bubble inflates, the harder it will be to convince the masses that property should be bought/invested in, the more explicit VI propaganda will become. The VI’s have had a fantastic run and they must be able to sense fear in the air and they’re not going to give up any ground without a (dirty) fight. Just expect a lot more of the same I’d say.

    David, of course it’s good that both sides of the argument get aired and it’s interesting to see differing points of view but you just seem to be posting VI propaganda now. There’s going to be a lot more of that spewed forth soon and I hope you’re not going to highlight all of it.

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  • I think most people here realise that the more the bubble inflates, the harder it will be to convince the masses that property should be bought/invested in, the more explicit VI propaganda will become. The VI’s have had a fantastic run and they must be able to sense fear in the air and they’re not going to give up any ground without a (dirty) fight. Just expect a lot more of the same I’d say.

    David, of course it’s good that both sides of the argument get aired and it’s interesting to see differing points of view but you just seem to be posting VI propaganda now. There’s going to be a lot more of that spewed forth soon and I hope you’re not going to highlight all of it.

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  • I could not find a more detailed breakdown of the numbers but I did find a summary of their methodology pasted below. It is basically based on data from mortgage completions. They adjust for mix and the average is weighted by price.

    “Notes to editors
    1. The mix-adjusted house price series are produced by Communities and Local Government and are being published on an experimental basis. Development of the methodology underpinning the indices has been undertaken in conjunction with the Office for National Statistics. The index will undergo a quality audit during 2007 with a view to gaining accreditation as a ‘National Statistic’.

    2. Since September 2005 the new mix-adjusted house price index is based on an enlarged sample of completions data (about 50,000 per month) from about 50 mortgage lenders who supply data through the Regulated Mortgage Survey (RMS) of the Council of Mortgage Lenders (CML)/BankSearch. Prior to this date the index was based on the Survey of Mortgage Lenders (SML) (about 25,000 completions per month). The number of cases received will also be affected by the total number of mortgages that have been completed.

    3. In January of each year the index weights are revised to reflect the pattern of property transactions during the previous 3 years. The mix-adjusted average prices for the rest of the year are then determined using these new weights. Consequently whilst house prices within the year are comparable – they are all based on the same weights – house prices between years cannot be compared because last year’s weights and this year’s weights are different. The index itself is constructed on a chain-linked basis, which enables year-on-year comparisons to be made. This means that the year-on-year change in the index for June, say, is effectively the change in the average price from June 2006 to January 2007 (using the weights for 2006) combined with the change in the average price from January 2007 to June 2007 using the weights for 2007. Therefore, the year-on-year change in the index is not the same as the year-on-year change in the mix-adjusted average price.

    4. The Communities and Local Government index is currently showing similar year-on-year inflation to other indices available from commercial sources. The slight difference will be affected by differences in weighting. The Communities and Local Government index uses expenditure weights, whereas other indices use transaction weights. Consequently, the Communities and Local Government index is influenced by house price inflation rates in the higher priced areas (which are currently in the South) where house prices – and therefore total expenditure on house buying – is highest. Similarly, regional inflation determined by the Communities and Local Government is more influenced by the market for the higher priced properties (i.e. the demand for detached houses).

    5. Note that the Communities and Local Government house price index figures released in this issue are based on completions during the month of June. Other recent indicators have been based on asking prices in July or prices based on mortgages approved during July. Therefore the Communities and Local Government figures are not directly comparable with these other indicators.

    6. A month on month comparison of the Communities and Local Government index and price is not advised, as the series are not seasonally adjusted and comparisons over periods of less than a year will be affected by seasonal fluctuations. The series will not be seasonally adjusted until a sufficiently long monthly series exists.”

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  • sold 2 rent 1 says:

    David,

    “Oh right so the great ‘crash’ is now being pushed back yet again!”

    My prediction at the end of 2006 was prices would rise until Q4 2007 or Q1 2008.
    Fred Harrison’s 300 year study of house prices concludes that HPs won’t crash until 2008.
    His prediction that 2006-7 (2 years) will be the winner’s curse where prices rocket is spot on.

    Have faith and stop looking at the short term indicators and look at the bigger picture.
    Remember bubbles always go on longer than anyone expects and picking the top is very difficult.

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  • david20040_0 says:

    I have no faith anymore I have been waiting for this since 2003.

    I remember when Professor Oswald said that house prices would crash between 2003 and 2005. 🙁

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  • David,
    In life every one has to fend for themselves. You have to take your decisions and if they come good world is at your feet and if they go bad they will crucify you. No one else can take the decisions for you. Its your money.
    And if you think the market will rise go put your money where your mouth is.
    I have read all your blogs today and you seem to be in a foul mood. Calm down take a prudent decision and go ahead with it. Whatever it may be. Life will give you the answer Good or Bad. and it will be years before you know it.
    Rest assured you will either live a life of luxury or reap the perils of the decision. And thats life…

    Maybe why we are on this website and these blogs is because the uncertainity that we see in the stock market today some of us are seeing it in the housing market for a while. If stock market can shed 10% in a week maybe its our wish( I repeat WISH) that the same will happen in the housing market as we see shaky ground in it as well.

    Hope you have a Good Evening.

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  • david20040_0 says:

    I haven’t got the money to buy a house, the only chance I would ever have is if they went down a little.

    I am saving as fast as I can but I can’t keep up and it is becoming hihgly frustrating.

    Ireland is dropping, USA is dropping, Aus is dropping but the UK, NZ and Canada seem to never drop.

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  • >david,

    You forgot to mention the HOME “asking price” results published today – they are going up too.

    The point is: House Prices can’t continue to go up at this rate forever. There comes a correction time in all markets – judging by the graph on the homepage, it could come sooner rather than later.

    The arguement is supported by the numbers of people who have obtained mortgages they can’t service. When they default – often becase interest rates rise (like they are rising now) the market gets depressed and prices change direction and drop.

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  • david20040_0, be patient and don’t believe what you read. House sale prices have gone up due to little activity at the bottom levels. Soon only the super rich will be able to buy and sell and using the same calculation, average sale prices across the UK will obviously be many times more.
    I bet you live in some supposedly trendy area of the south waiting for some 200k house to reach 160k. My advise to anyone is to move up north. Life is much better up north, including house prices.

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  • Sames here David, I turned 30 last week and still rent. I think my problem is that I missed the boat for the last rise.
    And now I’m waiting for the cycle to finish. And saving for the time it comes down.

    I think the decision has to be made on facts and the emotions have to come out. Some facts are as follows
    1) There are 607,000 fixed rate mortgages that will mature this autumn. Source CACI. (Saw in an episode of working lunch)
    Now I expect hundred of thousands of these go to under as they were paying around 4% but will now have to pay 6%+.
    This will increase there mortgages for a 100,000 by (2%) 2000 pa that is £166 per month.
    But this will take a few months to come out Jan 08. As people will have to fail on a few re payments before repossesion come out.

    2) Avg take home pay has fallen. These are official govt figures. So will people be able to keep up with repayments when they rise. Also these figures are skewed because people like David Beckam, Richard Bransons are making money and the common man holding extreme mortgage is not.

    3) What have we learnt from this stock market volatility? That there is no money to finance credit. What effects does that have?
    When all the people that I have talked about above and also people who are just remortgaging to eat the capital out of their property will go to the banks in months to come banks will not be able to finance these mortgages as they won’t have any funds to. Even ECB, bank of Japan and US Fed won’t be able to put in that amount of money.

    4) Cost of money is going higher: If you look at the bond market which is the fixed leg of exposure. I think this is too technical line of explanation let me try something else. These banks could get money cheaper than what ECB, FED gives which is there bank rate 4% and 5.25% respectively. But now to finance these deals they are borrowing at a higher rate.
    Because of the higher rate some deals will not go though and also for mortgages, higher interest rates have to be paid.

    5) Slider II rule: Why has credit dried up in the market:
    Banks have to keep a proportion of money as deposit based on the risky ness of the load. Meaning the lower the risk of the loan you keep less deposit the higher the risk the more you have to keep in deposit.
    A few years ago these parcelled loans were all given AAA+ rating for which banks have to keep just 56 pence for a 100 pounds.
    now there rating have fallen to say BBB or even less which warrants the banks to keep around £4 for £100. That has taken a lot of liquidity from the market.

    6) Unknown losses. Somebody in the world must be making the losses incurred due to the collapse in American housing market.
    BNP was the first to acknowledge and maybe today’s revival of Goldman sachs Hedge fund was another. Also a German hedge fund also went bust recently. In the coming weeks I see more banks might come ahead and say we have also lost money.

    7) Sub prime in UK: People might disagree. but you will see a lot of this in UK as well. I call sub prime where people can not pay for their debts irrespective of good credit rating. Even people with good credit rating have borrowed more than they can pay. Esp in the house price will come down.

    8) Where will banks make up for these losses: You guessed it right from us, the common man. All these losses will smoothly flow. In this game, The house (banks) always win.

    There are more to write but I think these are enough for now. I guarantee that if you go down into these figures you will find something else. Also did you read my blog of falling house prices in london. Stop believing the statistics, start believing of actual figures.

    Hope this helps

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  • Apart from the last time they dropped ….. Keep the faith David – common sense will eventually prevail. Just be glad you are not lumbered with a mortgage you cannot afford and are likely to lose the roof over your head.

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  • david20040_0 says:

    It just sucks when you see articles in the Guardian like House price rise £1000 a week in June, you think what the hell, how???????

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  • David,
    Thats the asking price. No one is getting the money for it. Maybe helps in remortgaging but no one is paying for it.
    propertysnake.co.uk was a very good example of the same.

    I also believe that there are no laws governing these statements. I think they are misleading and should lead to fraud cases on them.
    But I know that is not going to happen. So I need to pick up the facts from the pool of statistics flowing around.

    Also it is in there interest to keep these kind of statements in news it has and will lead to some people crack up and pay for it.

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  • Unfortunately they are not the asking price they are the selling price.

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  • Cheekie Charlie says:

    UC – “Just be glad you are not lumbered with a mortgage you cannot afford and are likely to lose the roof over your head.”
    Whats equally worrying to me is the safety of my savings which is the future roof over my head!!!

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  • David

    I’m 38, have never had a mortgage, am rapidly running out of mortgage repayment years (whenever that might start) and have some savings. I could afford to buy a house and I could also equally afford to use fivers to wipe my **** if I was a complete *****. I’ve had the panic in the past and I’ve been waiting for years too. I’m chilled about it now. Don’t lose your nerve. Rises and rises and rises are unsustainable and anything unsustainable in finance or economics quite simply will not be sustained. Therefore, once you accept that it is just a timing issue all you have to do is resign yourself to the wait and save and save and save to minimize the impact as best you can. No pain no gain works both ways remember and so far property developers and investors have had all the gains with no pain – SO FAR. It’s about to start toppling. Don’t snatch defeat from the jaws of victory for the sake of a twitchy you-know-what.

    You can’t force reality to be something it isn’t and you mustn’t commit financial suicide. Many, many people have though – they just don’t realize it yet. It’s a bit like selling your soul to the devil.

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  • captain sensible says:

    My older brother had exactly the same problem and feeling of despair in the early 90s – whether to mortgage beyond the hilt or wait. He waited, bought cheaply in the mid 90s after the crash and traded up a little later. He’s been stuck since because of the bubble but has decided to make the best of low interest rates and overpay. He’ll be mortgage free in a couple of years (aged mid 40s) or trade up post crash when prices are sensible. It sucks to be stuck in limbo, but sucks even more to take out a 200k mortgage now and find that in 3 years time the house/flat is only worth half that. Hang on in there!

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  • But Captain Sensible what if you are wrong, many here have stated how they have waited convinced prices would plunge only to see them roar again.

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  • Isn’t this ‘blip’ in house price increase something to do with the surge in 4 bedroom properties coming onto the market due to HIPS? The higher value of the larger houses is distorting the increase? The asking price report of home.co.uk published today certainly mentioned this as a factor is asking prices going up.. (see page 7)

    http://www.home.co.uk/asking_price_index/HAPIndex_AUG07.pdf

    Could the same reason be given for this government selling price survey?

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  • stillthinking says:

    David, you seem to have shown your heart on post 12. I am not sure if I can wait until the prices come down also. I am prepared to dump the country and perhaps you should consider it also.

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  • captain sensible says:

    If I’m wrong, it would the first time, as far as I know, that an asset bubble of this type hasn’t burst. The tricky bit is always the timing.

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  • David,

    I am glad that somebody is asking questions and challenging HPC but I think that you are being impatient.

    The factors that set this bubble up move slowly and cannot be undone quickly. Here’s an article you might like to read when you are feeling panicky about ‘losing out’:

    http://drhousingbubble.blogspot.com/2007/08/personal-story-by-lawyer-from-previous.html

    All my friends at work think that hosuing is fine and will never drop. I’m thinking in terms of two years before popular sentiment changes.

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  • Ha ha ha, that headline is embarrasing!!!!!!!!!! Price rises double in just one month!!!

    Trying to con you into thinking prices have doubled in one month!!!! Pathetic !!!!!

    They only doubled because they were so poor the month before!

    A tramp is not is not rich because his net worth triples from 20 pence to 60 pence!!!!!!!

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  • This maybe a little irrelevant but I’ll post it anyway…………

    Just watched the last ‘The Tower’ on the BBC… I must say It’s been nice to watch a slow speed real life documentary series about a total cross section of people that’s not full of the usual over edited ritzy c**p.

    Anyway the relevant point… Did any of you see the budding property tycoons? I believe they meant well but the idea of trying to ethnically cleanse Deptford with young city professionals was a little OTT. They seem to think changing an area of such chronic social problems is as easy as knocking out a second docklands… The key problem they seem to have over looked is the docklands was just that, an area of disused dockland with no existing residents I.e. easy to regenerate. Changing a place like Deptford needs serious government investment. I wonder how their property investment portfolio will fair in the future…..

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  • European-bear says:

    David…..do not dispair….property ownership is an illusion to those with big mortgages and interest only loans (a big proportion of buyers in the last year or two). Unless they reduce the debt, the bank effectively owns the property and they are tennants. But they have worse terms renting form the bank than renting from a landlord. 1. They pay more (IOL cost more than market rent in the UK just about everyhwere). 2. They are responsible for repairs. 3. They risk loosing in a big way if house prices decline.
    But renting from a landlord 1. Its cheaper. 2. The landlods doesd the repair. 3. It is risk free if property goes down in price (well not totally as the landlord might be repossessed…).
    I may return to the UK, and checking property everywhere it is so much cheaper to rent. I could buy, but I will not if I do return, well not at these levels. Renting is the best bet now. Buying is dead money that you risk losing….

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  • george monsoon says:

    David, your sentiments match mine exactly. All this crap they publish on price rises seems to fuel people into buying and enrages me that the cretins are stupid enough to keep jumping on board, but it cannot sustain can it? Wages are stagnant.. BTL property in my area is largely un-occupied because they are demanding ridiculous rents. Im so, SO relieved that I am not saddled with a mortgage right now. I remember the 80’s / 90’s crash and people were only borrowing on the strength of one wage back then, not two like they are now. There were not as many credit cards either. Interest rates are starting to climb (like they did back in ’89) and once it started, things deteriorated really bloody quickly, so don’t panic, we are already seeing the market crash, and even the government know they can’t hold the dam waters back any longer. Keep saving, as I am, because it will be our generation who are going to reap the rewards of patience and prudence.

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  • David, Deepak and George,

    I’m in the same boat too and I’m 33! If the market doesn’t crash within two years I’m planning to emigrate. I’ll be taking my UK tax-payer funded post-graduate education and leaving for a cheaper, sunnier place. I think of it as getting one back at the older generation who have priced me out of the market.

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  • Simple Simon says:

    First time I have posted.

    I thought only a couple of weeks ago I was reading in some papers that July figures showed the market had more or less stopped rising. Now I read that June figures show the market is still rising. Are there differing sources of data being used ?

    Presumably the most trustworthy source is Land Registry figures for completed transactions, which would tend to reflect prices agreed a couple of months previously.

    Can anyone explain. Thanks

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  • If it helps, I live in the S. E. I have just met an estate agent that has been made redundant. From a well known nationwide chain of agents. Things are not that good.

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  • in my neighbourhood landlords seem to be bailing out. I also know of one builder who had no new orders in a whole month – what is it if not the sign of people having so overstretched themselves that they can’t afford any upgrades/ refurbishments?

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  • The article itself points out that the number of buyers is falling, and yet we are also told that prices are not only going up, but going up more quickly than before. The inquisitive mind would want to understand how these two apparently contradictory facts could both be true at the same time…

    Data from the latest Land Registry House Price Index Report (dated June 2007), on number of completed sales (April 2007 being the latest data currently provided by the Land Registry on sales volumes):

    Price range £0 – £250,000
    Number of sales April 2006: 77,413
    Number of sales April 2007: 66,054
    Difference in sales volume: -14.7%

    Price range £250,001 – £800,000
    Number of sales April 2006: 16,981
    Number of sales April 2007: 15,960
    Difference in sales volume: 6.4%

    Price range £800,001 upwards
    Number of sales April 2006: 989
    Number of sales April 2007: 769
    Difference in sales volume: 28.6%

    All sales
    Number of sales April 2006: 94,142
    Number of sales April 2007: 84,024
    Difference in sales volume: -11%

    What does this tell the inquisitive mind?

    Overall number of sales had dropped, even back in April, and these completions will represent offers made in January, as sales take about three months to complete. There have been further rises in interest rates since January, so the more recent RICS data, confirming a downward trend in sales volumes, is unsurprising.

    What’s really interesting though, is that whilst overall sales volumes have dropped, volumes of sales for properties valued over £800,000 have actually increased! The purchasers of such properties are clearly not influenced by mortgage interest rate rises, unsurprisingly.

    What does this mean for the overall average property price in England & Wales (which the report quotes as £181,039)? Well, given these figures, even if property prices had gone down from April 2006 to April 2007, the overall average could have risen. How? Let’s use an example.

    April 2006: 10 semi’s sell for £150,000 and two mansions sell for £1,000,000 = 12 properties sold for a total of £3,500,000 = average sale price of £291,667.

    April 2007: 8 semi’s sell for £140,000 (7% drop) and three mansions also sell at £900,000 (10% drop) = 11 properties sold for a total of £3,820,000 = overall average sale price of £347,273.

    Headline in the Daily Mail: “Average house prices have risen 19% in a year!!!”. Even though prices have actually gone down.

    This is the flaw with just looking at headline figures. Try telling the Daily Mail that, though, and try telling the un-inquisitive minds that make up about 99.9% of the population (or so it seems), including some posters to this blog, unfortunately (I won’t pick on people by naming names, but you know who you are).

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