Lies Dam Lies & Statistics
On the 30th of January a national Sunday paper published an article about the slide in property prices. Yesterday I had a call from BBC radio Berkshire asking me if I had any thoughts on the article. As national newspapers in this country are on a crusade to try and depress the population it won’t surprise you that some of the statistics were pretty dire. House prices in Maidenhead have slid 27% between 2007 and 2010, in Slough it is 23%, Wokingham 19%. On the face of it this is all pretty negative, however there is a but and it is quiet a big one, the figures are based on flawed data, and the source is the Halifax. The flaw is that the data refers to mortgage and remortgage applications and not house sale completions. This may seem like a moot point but it is actually pretty important.
If we cast our minds back to 2007 the Halifax was lending money at rate never seen before, surveyors were presumably under pressure to help the bank to meet its lending targets so were probably pretty relaxed about what value they put on any given property. Fast forward to 2010 and the financial landscape could not be more different, banks are reluctant to lend and will be pressuring their valuers to be as conservative as possible with their opinions on price. So these figures are a reflection of the mortgage market not the property market. I accept that the 2 are linked but not so inextricably that mortgage applications would be an absolute reflection of house prices, not a detail the paper in question seems to have bothered itself about.
I am going to get up on to my soap box on this issue because I have for many years questioned the need for and the relevance of the monthly house price statistics released by the Nationwide and the Halifax. The 2 companies rarely agree on how much prices have moved, on occasions one may say that prices have gone up when the other says they have gone down. This in itself seems bizarre. How can one company see a rise and the other see a fall? I presume that they would argue that they use different mathematical formula. This again seems absurd, a property price can only move in relation to the price it or neighbouring properties previously sold for, what other figures are relevant? The reason I get so annoyed about this is that the national media take these figures and use them as evidence as to how the economy is doing. The problem with this kind of lazy journalism is that in the good times this helps to create a house price bubble and in the bad times it depresses the market. Journalists are far more interested in a shock headline than the facts. I remember in 1989 during the last property dip we had a call from the Daily Mail asking us if there was a street in Wokingham where we had more than 5 repossessed properties on the market. We assured them that such a street didn’t exist in Wokingham however we were happy to talk to them about how Wokingham was coping with the downturn “That’s no good “said the journalist “it ain’t depressing enough” ! Nothing sells like bad news.
Wokingham house prices have not dropped by 19% between December 2007 and December 2010. They have dropped but the fact is you really don’t need to know by how much because the only thing that matters is, can you afford it? If you really feel you just have to know then go to Nethouseprice.com because in my humble opinion the statistics released by the Nationwide and the Halifax are as much use to you as a chocolate teapot!
