11:24 AM, 28th October 2010, About 12 years ago
House price surveys are nonsense – and do not offer anything other than an indication of the value of a non-existent ‘average’ home.
Deciding which survey to trust is easy – none of them.
Depending on your loyalty, according to the Halifax and economists Academetrics, the average house price for September floats somewhere between £162,096 and £223,965 – a significant difference if you are trying to fix a figure for buying or selling.
Every survey proudly publishes proof of their analysis and shoves up a ‘housing economist’ to give an opinion on the results.
The sad truth is all the monthly surveys are nonsense and only serve to promote the bank, building society or organisation branding the figures.
House price surveys are a way of snatching free space in the media.
Think about the reasoning, most ‘price surveys’ are conducted by an organisation with a vested interest to promote a business.
Then take the fallacy of the ‘average’ home price. The average is just an arithmetical analysis of house price data that adds up the survey’s value of each home and then divides the figure by the number of property transactions.
The surveys do not take in to account low market forces, property type and location or any other significant factor that affects the price a buyer might pay.
Working out an ‘average’ price is the same as trying to win the lottery by coming up with some madcap formula to win the lottery with an average number that has filled each of the six slots since the day the first result was announced.
To decide which, if any house price indicator, is worth following, several factors need consideration:
In the end, the real value of a property is the price a willing buyer pays because that’s the agreed amount the home is worth to the buyer and seller. All the rest is meaningless speculation.
The only real purpose that house price surveys serve is to direct ‘the herd’ into panic buying or selling. Therefore, if your strategy is to run against the herd and the surveys are saying that properties are going down, it’s time to start buying, at least until the commentators change direction. That way, you are sure to be able to buy some properties at the bottom of the market. If the surveys say property is going up, you might want to consider starting to offload. That is unless you, like me, are in the market for the very long term. In that case, there is no bad time to buy, some times are just better than others. If you buy property every year, regardless of what the surveys say, history has taught us that you will win over the long term, i.e. every 10 to 15 years.
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