Property Price Ambiguity is the Order of the Day

There is something of a mixed bag in terms of reporting on house prices today. Three separate figures have been released by Halifax and, while they all constitute part of the same overall report, each tells a slightly different story.

The first criterion that has drawn a  significant amount of attention is the monthly house price index, which shows that prices dropped 0.6% in June compared to their average levels in May. This is the fourth time that month on month house prices have dropped since December. However, it is worth noting that this particular index is especially volatile and can often fluctuate because of factors that are not indicative of wider phenomena by which house prices may be reliably judged. While the figures are seasonally adjusted in order to take account of the fact that house prices are generally stronger in the summer than they are in the winter, there are still several other factors which can cause peaks and troughs in monthly house prices that, while lending themselves well to virtually pointless extrapolation, do not represent overall occurrences in the property market they are intended to measure.

The second barometer of property price activity that has drawn comment this morning is Halifax’s annual price index, which tells a very different story; house prices have risen by 8.8% between June 2013 and 2014, up 0.1% on the figure for May. This represents the largest annual increase in the average price paid by house buyers since October 2007. While the annual price survey is somewhat more reliable and certainly less volatile than the monthly price index, it is still not the most representative of measurement tools.

The quarterly price index is, according to the most analysts, and even Halifax themselves, the most reliable indicator of overarching trends in the market. In the three months to June, according to the quarterly data set, average house prices were up 2.3% on the levels they achieved in the previous quarter. There is very little change in this level of quarterly house price inflation since June 2013. Perhaps this is why the quarterly figures have gained the least traction amongst most commentators. ‘House price inflation same as last year’, lacks the resonance of other headlines such as: ‘Largest house price jump in 7 years’ or ‘House prices finally falling’. However, though it seems to be gaining the least exposure in the media this morning, it is this figure that is actually by far the most interesting.

The fact that there is little oscillation in quarterly house price inflation could be interpreted in one of two ways, each no less significant than the other. Firstly, one could take it to mean that the various attempts by both the Treasury and the Bank of England to intervene and subsequently cool the market have essentially had little or no effect. Secondly, the figures could be viewed as representing a steady and sustainable level of house price inflation that would support the coalition government’s claims to have created a solid, stable and viable economic recovery and would, in particular, vindicate the Chancellor George Osborne’s financial policies, especially his Help to Buy scheme, which was brought into effect in the quarter leading up to June of last year.

It is probably safe to assume that which of these two explanations one chooses to accept, may well depend upon which side of the House of Commons each particular commentator sits on. Outside the micro-biosphere of Westminster, and especially amongst potential home buyers, opinions and interpretations of these figures will probably be far less polarised. The main point that can be gleaned from the figures released by Halifax today is that, whether because or in spite of outside manipulation, house prices are continuing to rise and they seem to be rising at quite a stable rate. While remaining rather ambivalent in regards the reasons why, most people with eyes on the market will be watching to see whether they continue to do so in the coming months.

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