The Office for National Statistics (ONS) house price index has long been relied upon as the most reliable of the indices when trying to decipher what house prices have actually been doing. This is due to it being the only index that doesn’t discriminate on how buyers paid, and includes all residential sold prices, be they bought with cash or borrowed money. The only main exclusions are commercial property, right to buy transactions and other small property transfers.
Other indices such as Rightmove cover initial asking prices, while others cover mortgage applications, with some such as Nationwide excluding buy to lets. Halifax does cover buy-to-lets but both Halifax and Nationwide exclude cash purchases.
But how reliable is the ONS HPI?
The UK HPI was introduced in 2016 and is a joint production by HM Land Registry, Land and Property Services Northern Ireland, Office for National Statistics and Registers of Scotland. Its records are based on land registrations maintained by HM Land Registry.
Despite a two–month time lag before each report, the time to process sales is slow, so data from previous months is constantly updated each month. Only after about a year should the data fully reflect what the market was doing at the time as more transactions are included.
When reading the data it’s important to consider that Northern Ireland figures are updated quarterly and in some reports new builds aren’t included due to longer processing times so are pooled together over two months. This has been the case from November 2022 to April 2023.
What’s the difference between ONS/Land Reg data and when is the data released?
HMLR updates its data on the 20th working day of each month. The volume of transactions here are higher than in the ONS house price index as they include residential and non-residential property transactions in the UK and its constituent countries. Residential property transactions where the buyer or seller is a corporate body, company or business are also excluded from the HMLR data in the UK HPI, but included in HMRC property transaction statistics.
The ONS receives transaction level data from HM Land Registry and Registers of Scotland on a monthly basis to produce the UK HPI. ONS processes all the transaction data it receives in the latest month to produce the latest month’s UK HPI statistics. ONS identifies outliers in the data, but it does not “amend” the data during the month.
What transaction volumes are the UK ONS House Price Index based on at the time of publishing in 2023?
In comparison with HMLR data sets you can see the actual transaction volumes used are considerably lower to begin with but have remained on average around 33,600. This seems a remarkably small number to be basing their report on which begs the question if they should further delay their report or improve the speed in which transactions are updated.
What’s been happening with sales volumes in 2023?
The latest HMRC estimates of monthly property transactions completed in the UK with a value of £40,000 or above are available here: Monthly property transactions completed in the UK with value of £40,000 or above – GOV.UK (www.gov.uk)
The UK (seasonally adjusted) volume estimates published by HMRC suggest that sales volumes have fallen in recent months. For example, HMRC’s revised estimate (as at 11 July 2023) for UK seasonally-adjusted sales for February-23 is 87,680 sales. This is a lower number of sales for February than compared with HMRC’s associated revised estimate for February-22 which was 109,670. This represents a fall of 20% in sales volumes. It takes time for transactions to be processed for inclusion in the UK HPI. Therefore, it is not currently possible to know if the final revised sales volumes for February-23 will show a similar reduction compared with final revised volumes for February-22 in the UK HPI.
What causes the delay in Land Registry Transactions?
Currently the processing times at Land Registry average around 25 days but there is a significant time lag in registering New Builds of around 10-12 months. This is apparently due to the additional work required in inputting a new property. This aside, there still is a substantial time lag on processing transactions which they contribute to the wrong information being initially filed:
“Last year we issued almost 1.2 million requisitions (requests for more information or clarification) to our customers. For the more complex applications, almost two-thirds require some form of requisition before they can be processed.”
I asked the Land Registry the reasons for the delay in typical residential transactions and it seems the honest answer is manpower. A backlog did occur with the surge in sales last year and during the Stamp Duty holiday but also there was a feeding error on their automated system. To improve data turnaround times they say they are:
“Investing heavily in new capacity and capabilities, and working relentlessly across our all systems, structures and processes to drive efficiencies and improve outcomes for customers…. recruited more than 2,000 new colleagues in the last three years (including 1,700 caseworkers and nearly 100 digital specialists), with over 33% of our current workforce having joined us during that time”
The big question…
Why then, if HMRC records transactions through Stamp Duty receipts, which buyers are legally required to pay within 14 days of completion or risk penalties and interest payments, are they not applying the same pressure on solicitors when registering the property with the Land Registry? Would it not be easier to collect all the data at the same time? This would result in a more accurate house price index, which the public can trust when they need it most.
