New FT index signals end of housing boom
By Simon Briscoe and Ed Crooks
Published: September 5 2003 22:17 | Last Updated: September 5 2003 22:17
House prices have risen by only about 4 per cent in the past year, well below the rates published by estate agents and mortgage lenders, the new FT House Price Index has found.
The more subdued state of the market indicated by the FT index should help reassure the Bank of England that the housing boom may be coming to an end.
The Financial Times House Price Index, calculated by the consultancy Acadametrics, is designed to end confusion about house price changes that has plagued the market for years.
All the various measures of house prices are showing slowing rates of inflation, as large monthly increases in 2002 have been replaced by much smaller increases this year.
The FT index has been compiled to foreshadow the Land Registry figures which are the most comprehensive measure of house prices because they record every transaction. All other indices are based on samples.
Prior to this launch, no measure has included cash sales and been available monthly in a timely fashion. By taking the essence of the data from each supplier, the FT House Price Index will also avoid the sharp month-to-month lurches that are more likely to be due to statistical quirks than real movement in the market.
The new index shows a much sharper slowdown than most others. The latest figures, for August, show prices rising by 0.6 per cent in the month and 4.3 per cent over the past year.
The measures of house price inflation published by Halifax and Nationwide, the mortgage lenders, were 19 per cent and 17 per cent respectively for August. Rightmove, the property website, estimates a rate of 12 per cent in the year to August. Hometrack, a research firm, estimates house price inflation of 2 per cent.
Mervyn King, governor of the Bank of England, has in the past descr ibed the divergence between the indices from the Nationwide and Halifax as both "puzzling and unfortunate".
Gary Styles, director of Baseline Capital, and a housing market expert, said of the FT index: "This is an excellent development - and an ingenious index."
He said he knew "many businesses are looking for a measure that cuts through the debate about which index is the best and encompasses all the information in one place". |
