Get on the right track

There used to be the Halifax house price index and one from Nationwide. That was it. They were definitive; house prices went up or down, and you knew exactly by how much. Now, there’s a much wider range of residential property indices. IPD, LSL, Hometrack, Rightmove, Primelocation, it can be a confusing landscape, with some telling you prices are rising, other that they’re falling. They don’t even agree on the average house price. Academetrics, which produces the LSL index, points out that the average house price in 2010 might have been £220,000 or £170,000, depending on which survey you chose to believe. If you’re confused, you’re in good company, back in 1998 Mervyn King, Governor of the Bank of England, complained that the Nationwide and Halifax indices had diverged widely and neither he nor his economists could really understand what was going on with house prices. Nationwide was reporting a 12 per cent rise in prices, Halifax said it was 5.6 per cent, and the Bank, after careful research, thought it was probably about nine per cent. So why do these indices give such different answers? And do we need them all? To understand why the indices have different results,…