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| The ONS revised down house price growth in November and December |
The index, which the ONS describes as “experimental”, revised down the previous two months’ house price growth significantly last week. The annual rate in December, initially reported as 7.2pc, was scaled back to 5.7pc.
Lucian Cook, head of residential research at Savills, said: “The ONS index was trailed as a single definitive index for the UK housing market, providing more detailed information on transactions and house price movements at a local level and between different parts of the market. This was always going to be a huge undertaking, fraught with difficulty.
“However it continues to be blighted by issues around accuracy and reliability. These have been sharply brought into focus by the growing discrepancy in reported transactions numbers compared to figures coming out of HMRC.”
Last week’s release by the ONS said that transactions had fallen 21.2pc in England in the 12 months to November 2016; HMRC’s record of the same sales volume reported the number had fallen by just 7.1pc.
Capital Economics said the index is “likely to be overstating house price pressures”, partly due to a suggestion that the price of new build homes has surged, at 29pc in the year to January, compared to 5pc for existing homes.
“The new build figures are strange relative to what we understand is going on in the market,” said Neal Hudson of Resi Analysts. This overexagerration in the index is due to a lag in the time the Land Registry logs such transactions, creating an upward bias on a smaller sample size of new build properties.
Mr Cook added: “As it relies on information from the Land Registry which takes time to be accumulated, recent figures are constantly being reviewed as more data becomes available. Local level results are particularly volatile and can show significant swings in price movement, especially where transaction levels are low.
“That means some of the results are more of a reflection of the robustness of the index rather than what is actually going on in the market at a local level. So it continues to be important to look at a range of measures to understand what today’s market.” Mr Hudson added: “The ONS needs to be more explicit with what the known issues are.”
An ONS spokesman said: “Homes can only appear in the index once the purchases have been registered with the Land Registry. Due to the delay that can occur between purchase and registration, this can lead to initial house price estimates being revised, though the revisions are usually small.
“Changing the current revisions policy would affect the number of transactions recorded but would usually have little impact on average prices. ONS is reviewing its revisions policy to ensure all transactions are recorded.
“While revisions can be in both directions, over the last six months they have tended to be downward.”
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