October 9, 2005
Accurate Survey of Spanish Property Prices, Is It Currently Possible?
I received this article from http://www.ipropertysearch.co.uk/ today
which explains why, in the UK, different marketing groups often come
to different conclusions about housing market trends there.
The basic problems are those of monitoring advertised prices versus
agreed prices and the time lag between agreeing a sale and closing
the deal. The situation in Spain is very similar except that almost
no-one (often including the public notary) is party to the 'real'
price paid for a property in Spain.
I'd be really interested if any of you are comparing the Kyero data
to other sources and whether such discrepancies are apparent to you.
Article quoted from: http://www.ipropertysearch.co.uk/
In a press release yesterday Hometrack discloses further effects
that it says cause the big differences currently seen between
indexes, and says most indexes may be misleading commentators and
policy makers.
One key reason why house prices indices vary is they monitor price
information at different stages in the house buying process, and
they don't necessarily take into account areas where activity has
slowed considerably.
Hometrack said yesterday that it's latest survey shows an annual
price fall of 3.6% as opposed to an increase shown by other indexes
such as Nationwide and Halifax. Home track monitors prices agreed.
With Hometrack monitoring house prices at point of agreed sale
price, Halifax and Nationwide at point of mortgage approval and ODPM
and Land Registry up to four weeks and six weeks after mortgage
completion respectively, there is a significant time lag of up to
six months in house price commentary. However this does not explain
the major differences between the indexes, said Hometrack.
So what is the difference?
Hometrack's monthly index monitors the overall housing stock, not
just those areas that have market activity. By polling estate agents
active in every market, Hometrack is able to also include those
markets where there is limited activity.
The first indication of a market decline is typically a lack of
activity, as sellers are slower to adjust to lowered expectations
than buyers. Sellers will normally not accept an offer until they
are convinced that a higher one will not be forthcoming. By tracking
prices from the best estate agents around the country, Hometrack's
index is able to factor in the value of all housing stock including
areas of more limited activity. Indexes reliant solely on
transactions are highly volatile and are biased towards the sector
of the market that is currently the most buoyant.
Another significant factor in monitoring the value of the UK housing
stock is the `first time buyer' effect. With the lowest number of
first time buyers in over 25 years at 31% (versus 50-55%
traditionally) and the levels of activity dropping by 33% from the
first quarter of 2004, activity at the bottom end of the market is
at an all time low. In the current market it is no surprise
transaction based indexes show an increase in average property
prices as they reflect a snapshot of a higher proportion of more
expensive (second and third time buyers) properties.
John Wriglesworth, housing economist of Hometrack comments: 'Housing
surveys documenting an increase in annual growth are misleading
policy decision makers and the Bank of England.'
House price surveys that are dependent upon transaction prices are
not taking into consideration the property prices across the whole
market and are therefore distorting the figures and over-egging the
market. This distortion is currently at its most marked with the
extremely low levels of activity at the bottom end of the market.'
Who's to believe?
Well, they are all correct in what they do, and if used in the way
they are designed to be used. So briefly, what are the major
differences?
Two property website ones Hometrack and Rightmove collect data from
asking prices, but they statistically work differently and don't
produce identical results. Their big failing is that they don't
source the actual price paid and whether the sale was successful.
But the trends are clear and the results come earliest.
One of the issues with surveys like Halifax and Nationwide is that
they are conducted by mortgage lenders and so don't record sales
made without mortgages, currently about a quarter of UK homes are
sold with cash transactions.
The Land registry survey, which comes out every three months lags
the market by a long way but is arguably the most exact as it
records every property transaction. (Except re-possessions and
transactions caused by divorce as these would skew the figures.)
The only survey to explicitly measure the price movements of first-
time buyer properties is the government's experimental survey which
comes out monthly but lags most of the other surveys. Its data comes
only from mortgage lenders.
Category: The Costa del Sol Property Market.