The Nonsense That Is House Price Reporting

As someone who wrote a report in late 2007 explaining why house prices would fall over 30% in the next five years (from that start point), I may not be best placed to have a rant about house prices and the way that movements are reported but here goes anyway:

The reporting of house price information is completely skewed by one simple fact; only sales of house prices are considered, any house that is over-priced and does not sell are not considered. So when my newspaper reports that the average house price is now “£184,000” or whatever I take this with a pinch of salt because this is actually the average price that houses which sell are sold for.

If houses that don’t sell are taken into account then the average must be lower. Imagine I put my house on the market for £300,000 and have to sell at the best price I achieve over, say, three months then I might only get £220,000. Desratizar Casa Precio Because in the real world people don’t have to sell their houses at the lower figure, even though in reality that is the market price, the sale is aborted and the figures don’t include some of the most statistically relevant numbers.

If we then move onto the reporting of the movement in prices we then see further strange and worrying trends, firstly on the same day recently the Halifax announced a slight fall in prices, the Nationwide a slight rise. Of course, both can be right, as they may be measuring different baskets, but even so the publicity they got was astonishing considering both figures are probably wrong and have no regional context (certainly at the level of national press coverage) and one wonders if they are not stoking the fires.

The style of reporting through the media is bizarre. A movement of 0.3% in a month is given statistical relevance by headlines such as “house prices rise in December”; these headlines are often front page. The points above argue that these figures are heavily unreliable as any form of useful measurement. If national papers skew this with headlines of the sort above the price movement and its importance become psychologically significant to many readers and create a mental picture which is misleading.

The whole reporting mechanism surrounding house prices is a deception which leads to a set of views held by, what appears to be, a majority of people in the UK which when viewed strictly from an investment perspective is – put bluntly – wrong.

Examples of this are thoughts such as “property always goes up over the long term”, “you can’t go wrong with bricks and mortar”, “my property is my pension” and so on. The view of property ownership is that it is a sure fire way to build long term wealth. Using strict economic and investment principles this is untrue and in my view for a very long time ahead is likely to be proved bunkum, people buying property today are investing in a risky asset and as with any such investment could go horribly wrong.

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