Nie moj cyrk, nie moje malp

Okay, just a quick one! Honest. By the way, the title refers to a recent Polish idiom I heard recently, meaning ‘not my problem’ – it literally translates as ‘not my circus, not my monkey.” It has almost no bearing at all on anything, but I thought it was awesome.

So: house price indices!

 There is a lot of confusion around house price indices – so I will do my best to add to that confusion by writing this blog based on absolutely no background research whatsoever, save for a lecture I had a few years ago, and my recent perceptions of actual, like, reality.

I read this morning in a newspaper that house prices have gone up, and also down (separate newspaper) and have also possibly stayed the same (third newspaper from last week).

So why the difference? Well, I don’t really care to be honest – they are weighted differently, have different sample sizes etc etc blah blah blah.

HOWEVER house prices have, on average (important) gone down A LOT. And I know this because a) I know everything and am always right, just ask my spaniel (but not my wife, she disagrees on this point) and b) I am an RICS Registered Property Valuer, so I can legally tell you what your house is worth, despite the fact that I can barely even remember my lectures and accidentally burnt a lot of my lecture notes.

Firstly, forget the fact that people completely forget about inflation when discussing house prices, so even my spaniel can see that house prices have dropped by a third in real terms (no one mentions this in the media, ever). I recently tried to introduce the concept of inflation to a middle aged Chartered Surveyor I know who is very knowledgeable about property and construction, probably more so than anyone I know, in fact, as he is one of the few people in Britain who is both a Chartered Architect and a Chartered Surveyor. I won’t name him here to preserve his anonymity, so without expressly divulging his identity, let’s for the sake of this blog post just refer to him as ‘my father’: half way through my explanation of exactly what inflation was, he accused me of inventing "voodoo economics". But I digress. 

Back to my point, the important difference is this: the average price of a property nationwide is different from the average price of a property bought and sold.

Example: if you have 10 houses, 8 worth £100k and 2 worth £1 million, then the average house price is £280k. This in itself is meaningless, as there are no houses worth £280k AT ALL in this scenario, but then it is a sort of useful benchmark.

House prices are dictated at the margins, and average prices based on transactions – so if every house was bought and sold then we could base our average on the £280k figure, as an average of all the transactions that have taken place.

But, if the lower end of the market is stagnant (which it is), and the only houses being bought and sold are top end, eg the only housing transaction in this scenario is one of the million pound house being sold, what is the average house price, based on transactions, according to the indices? (Keep up Nick Clegg). It has gone up (a lot in this instance), despite no movement elsewhere. Now imagine the other houses are falling in value in reality, and the figures are even more screwed.

This is an extreme example, but as a microcosm is what is currently going on – house prices are falling, apart from a minority in London, but this is rarely reflected in the figures.

But then again, I rent, so it’s not really my circus, or my monkey.