HPIs hampering accurate valuations
Recently house price indices have come in for increased scrutiny with industry figures querying the validity of some figures.
Tim Hammond, a partner at property sector focussed data analysis firm Agent Analytics, said that the overvaluation of properties could have repercussions for many buyers.
He said: “The knock on effect of overvaluations could see many buyers rejected for their mortgages.
“Some indexes miss the trend every month and are just responding to greed and fear in the market.”
Richard Rawlings, who is also a partner at Agent Analytics, said that valuers should look at the quarterly figures offered by indexes rather than the more volatile monthly figures.
He said: “If surveyors are looking at the indexes to help with their valuations they should be looking at the quarterly figures.
“I’m sure many surveyors realise the figures just aren’t right. You just have to look at the latest figure from the Land Registry – the only obvious and true measure of value albeit 1-3 months out of date. The difference between the monthly and quarterly figure is almost £100,000. “
One leading estate agent even went as far as branding the Rightmove index as “absurd” and “seriously damaging to the property market”.
Ed Mead, director at Douglas & Gordon, said that quarter-on-quarter figures provide a better barometer of what is actually happening in the market.
He said: “Some of the figures used in these indexes are just plain wrong at worst or out of context at the very best. By trumpeting statistics that are in some cases obviously absurd those behind the indexes can inadvertently leave the market facing serious long term consequences.
“More often than not it’s the sensationalist element in any statistic that ends up being used by the media.
“The market has turned a corner but the recovery is still fragile. We have to be careful that such indexes don’t give vendors or surveyors unreal price expectations.”
With a number of surveyors using the indexes as part of their valuation process Andy Knee, chief executive of LMS, also had concerns about increased price expectations.
He said: “The reports of increases in property prices has left some vendors with very high price expectations.”
The latest house price indexes have the average values £252,418 (Rightmove), £172,127 (Nationwide) and £170,733 (Halifax).
Rawlings said: “With such a significant disparity between the different indexes it is easy to see how confusion arises. It may be time to look at different ways to calculate the indexes, such as moving from mean to median averages, which could help to remove the anomalies.”