UK property prices questioned on concern government is ‘rewriting history’

A new way of indicating house prices was launched in June and, according to the data, the outlook is very positive. But some have claimed the revamped method is no longer a precise barometer of trends.

Housing in Greenwich in London. Property prices outside the capital seem to have closed up on those in the city but the data has been questioned after a new index was launched. Matthew Lloyd / Getty

The accuracy of new UK government data that suggests the average price difference between property in London and that outside the city has closed significantly has been called into question by a property investment services provider that claims the government has “rewritten history”.

London Central Portfolio said the figures show the average price of property in England and Wales reached £221,832 (Dh1,074,576) in May, now standing at almost half the price of Greater London with a figure of £472,163. This compares with previously released Land Registry data from March when property in the capital was three times more expensive than the rest of the country.

Naomi Heaton, the chief executive of LCP, expressed concerns over changes to the highly regarded Land Registry Index, which had been used as a reliable barometer for property market trends for the past 20 years. In June, the new index incorporating data from the ONS was launched. This replaced the Land Registry’s old HPI data.

“Whilst still in ‘testing’ stage, the new statistics bear very little resemblance to the old data,” Ms Heaton said.

“When the new data set was launched, average prices jumped up 15 per cent in England and Wales and the government appears to be rewriting history. Price growth now reflects a substantial 41 per cent increase since the credit crunch low point, compared with just 26 per cent in the old index.

“Our question to the government now is whether their property records have actually been under-stating average property prices by up to 15 per cent in England and Wales for the past two decades?”

In London, prices fell by 14 per cent in the new data set. As a result of the updates, London looks significantly more affordable to the domestic population with average prices now running at well under £500,000, said LCP.

“This is frighteningly reminiscent of the time when the ONS took over a data set initially produced by the Council of Mortgage Lenders. Recorded prices changed so dramatically that the impact of the 1989 recession was entirely eliminated,” Ms Heaton said.

The apparent discrepancy was not directly addressed by those behind the new index, according to the UK's Guardian newspaper, which reported on June 14 the ONS as saying: "The introduction of improved methodology and data sources has led to differences in published prices when comparing the new UK house price index with the previous house price indices. However, when comparing the respective trends over time, the three series show very similar trends."

The ONS added that the formula used by the old ONS index was “sensitive to extreme property values, and as a result the prices can be skewed upwards by high-value property”.

The Land Registry and the ONS have traditionally calculated their indices in different ways, which may explain why their conclusions have often been very different. The ONS said the average cost of a UK home in March was £291,820, while the Land Registry reported that the average house price in England and Wales was £189,901.

“Work has been taking place over the past two years to develop a single, official HPI that reflects the final transaction price for sales of residential property in the UK,” said a Land Registry spokeswoman.

LCP said the latest statistics indicate prices in England and Wales have begun to feel the benefits of record low mortgage rates and recent government stimuli initiatives such as the 2014 reduction in stamp duty and the Help to Buy scheme.

According to the new data, “Price growth in May reflected a healthy 1 per cent increase versus the previous month, whilst prices were up 8.7 per cent year-on-year, well above the average market appreciation seen since the Credit Crunch of just 4.9 per cent per annum,” the company said.

Despite the new Land Registry statistics suggesting that prices in England and Wales are quickly catching up, the picture in London remains strong, LCP said. In May, prices were up 1.5 per cent versus the previous month and 13.6 per cent year-on-year.

“This new data is certainly encouraging news for the domestic property market as a whole, where average prices are under £500,000,” said Ms Heaton. “Despite the uncertainty pre-EU referendum and a widely anticipated pull back post-April 1, following the introduction of the new 3 per cent additional stamp duty levy, all areas appear to reflect high levels of appetite.”

However, she added, “This does not factor in any change in sentiment since Brexit. Weakening economic indices and potentially more stringent mortgage criteria imposed by banks may create a downward pressure on the domestic market.

“On the other hand, we predict the rest of the year will continue to demonstrate positive uplifts for the prime central London property market, under £1 million, underpinned by the weak pound and continuing low interest rates. Since last month’s Brexit announcement, LCP has received five times more enquiries to subscribe to its Central London residential fund on a pro-rata basis than in the 2 months preceding the vote.

“Vendors are also hiking up their prices,” Ms Heaton said.

“One-bedroom flats which were being marketed at an average of £675,000 in January are now being marketed at £750,000, an 11 per cent increase. In contrast, the high-value end of the market is still suffering from the impact of heavy tax increases and political uncertainty.”

Follow The National's Business section on Twitter