England & Wales HPI Footnotes and Methodology
- LSL Acadata E&W HPI is derived from Land Registry (LR) house price data, seasonally and mix adjusted by property type. © Crown copyright material reproduced with the permission of Land Registry. The prices are smoothed to show underlying trends. LSL Acadata E&W HPI includes cash purchase prices and when fully updated LSL Acadata E&W HPI is based upon the complete, factual house price data for England & Wales, as opposed to a sample.
- Most indices employ data available to the provider as result of its business; index methodologies are designed to exploit the advantages and overcome the disadvantages of each particular dataset; a series based upon asking or offered prices is not the same as a final price series such as the LSL Acadata E&W HPI and the ONS UK HPI. These can be prepared only when the prices at which properties have been transacted have been recorded by the Land Registry; valuation series can be prepared whenever the data (e.g. asking or mortgage offer prices) are available to the provider; publicity accrues to those indices which are released first; indices published at or before month end are likely to employ data for the current and prior months.
- Typically, only some 35% of transactions are reported to LR at month end. LSL Acadata E&W HPI overcomes this delay with an “index of indices” model, purpose-developed by Dr Stephen Satchell Economics Fellow Trinity College Cambridge and Dr George Christodoulakis, then at the Sir John Cass Business School, to estimate the % Monthly change for the month concerned as if all the data were available. The LR-based ONS UK HPI, like its mortgage-based predecessor, is published c.6 weeks after the month in question, enabling ONS to use a feed from LR of the c.65% of transactions for the month recorded by the 15th working day after the month end. The geometric mean prices offered by these first monthly releases of the ONS UK HPI may be best compared with the arithmetic mean prices within each first update of the LSL Acadata E&W HPI for the month using (see para 4) c.80% of the month’s transactions and published a few days ahead of the ONS UK HPI for the same month
- LSL Acadata E&W HPI provides prices at national and regional level back to 1995 and, at county/London borough level, back to 2005; back-cast national prices for graphing are available to 1971. With only some 60,000 monthly transactions now occurring compared with at least 100,000 in past markets, reduced data volumes are a problem for every HPI. LSL Acadata HPI employs not only the above “index of indices”, but also a series of auto regression and averaging models. The latter use a rolling 3 months of data to provide an average price for each month to show trends, as mentioned above. After the elapse of one month, LR provides c.80% of the transactions for the prior month, used to replace the initial LSL Acadata E&W HPI with a first update for the month shown in the initial release for the following month. Two months after any given month, LR provides c.90% of the month’s transactions, sufficient to enable us to describe our next update as a final LSL Acadata E&W HPI index, closely approximating the LSL Acadata E&W HPI ultimate results; ultimate LSL Acadata E&W HPI includes the price of virtually every single LR transaction for the month, smoothed, seasonally and mix adjusted and is prepared when the price of no additional reported transaction affects the index. Supposing a month when 60,000 houses were sold, the updated LSL Acadata E&W HPI uses c.48,000 real transactions for the month (as well as, by smoothing, c.54,000 transactions for the prior month); ONS UK HPI when first released would use 42,000 mortgage completions. The Rightmove asking price index uses the most data of any HPI. The lender HPI data volumes are not quantified; the Halifax HPI employs three-month smoothing for annual but not for monthly change results.
- In each of the 10 <b>regions</b>, an average of only some 6,000 transactions now occur monthly; hence, we wait one month, pending receipt from LR of the c.80% sample and provide monthly results one month in arrears of the most recent month. In our Regional data table, red data represent initial LSL Acadata E&W HPI results, blue data represent updated LSL Acadata E&W HPI results and black data represent LSL Acadata E&W HPI final results. Nationwide publishes regional data quarterly. Halifax HPI regional data are available quarterly from Markit plc.
- At county and London borough levels, c.60,000 national monthly transactions, spread over 10 regions and 108 counties and 33 London boroughs, provide an average of only c.425 house prices monthly within each sub-district. Even delayed one month and smoothed over three months, LSL Acadata E&W HPI is indicative until we are able to publish the LSL Acadata E&W HPI final index using the LR 90% sample. LSL Acadata E&W HPI data are calculated on a consistent basis from county and London borough through to region and ultimately to national level; at every level, the current month price represents the average of the prices for the current month and for the prior and subsequent months (“three-month, centre-month smoothed”).
- Data limitations are not confined to volumes. LSL Acadata E&W HPI is unable to identify different prices according to e.g. numbers of bedrooms; the lender hedonic indices and the ONS UK HPI do so. LR data exclude commercial and thus auction sales, and do not reflect repossession prices on the grounds that such prices do not reflect those between a willing buyer and a willing seller; some feel that auction prices represent true market prices; others believe that the repossession prices do not.
- LSL Acadata E&W HPI is prepared from Land Registry data using a methodology designed to provide a “true measure of house price inflation”; Acadata does not guarantee the accuracy of the LSL Acadata E&W HPI results and Acadata shall not be liable for any loss or damage, whatsoever, consequential upon any error, incorrect description of or inadequacy in the data; persons using the data do so entirely at their own risk; LSL Acadata E&W HPI is freely provided for publication with due attribution to Acadata. Permission is required for any commercial use of the data.
- The monthly, smoothed, average Land Registry prices at regional, county and London borough level by property type, which underlie LSL Acadata E&W HPI, together with historic data, are available from Acadata as in NOTE 6 above.
- LSL Acadata E&W HPI was published by the Financial Times as the name FT HPI from September 2003 until December 2009 when LSL Property Services obtained the right to sponsor the index. Until the October 2013 LSL Acadata E&W HPI was published, it was prepared by Acadametrics. Acadametrics then changed its name to Acadata to reflect its new focus entirely upon house price indices and data, following its agreement to sell its 50% holding in MIAC Acadametrics to MIAC Analytics, its New York based partner.
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