Methodology

We use a repeat sales based methodology.

A repeat sales methodology uses ‘pairs’ of price points for properties that have sold more than once to compare price change on a like-for- like basis over time. The other most common methodology used to construct index series is the hedonic or multivariate regression model which is used by Nationwide, Halifax and the Office for National Statistics.

All methodologies have their pros and cons which have been well documented over the last decade – the National Statistician’s Review of House Price Statistics, Government Statistical Service, December 2010 (download it here) is one of the latest and most comprehensive reports on house price indices.

Our primary focus when building house price indices is to create index series that represent the actual trends in the underlying market as closely as possible. We benchmark our national and regional series to monitor their performance over time.  Creating accurate house price indices is a challenge whichever headline methodology and source data is employed. Relatively low market turnover and a lack of homogeneity in housing stock create challenges in accurately tracking house price inflation.  

The Hometrack indices are based upon a large database comprising 100% of recorded sales prices from the Land Registry ‘Price Paid’ dataset and equivalent data from the Registers of Scotland.  This price paid data is supplemented by mortgage valuation data. All data is obtained monthly and placed through comprehensive cleansing and verification processes. We have sufficient data to produce robust monthly house price series.

Our data for pricing goes back to the early 1990’s with the house price index series starting from January 1995.

Hometrack have been producing monthly, local level house price indices since 2002 but these were unpublished until October 2014.

These localised indices form a key part of the Hometrack automated valuation model where indexation is a key element of the valuation system. We are now making available the headline regional and key city level series to provide greater transparency on housing market trends at a sub-regional level.

The Hometrack UK Cities House Price Index series is a monthly, non-seasonally adjusted series running back to January 1995.

The Hometrack House Price Indices are weighted according to the volume of housing stock in each geographic area. All index series are built at a property type level and then aggregated to the headline index for all property. The property type weightings are adjusted dynamically over time each quarter as the stock of housing grows, but the absolute changes are small.    

The primary output of our house price index build process is a monthly ‘multiplier’, the amount by which house prices have changed over the period based on the available evidence for the relevant geography.  This monthly multiplier is used to create a non-seasonally adjusted index of house prices.  The index can be used to track changes over time and compute a rate of house price growth. 

Like all other published UK house price indices, the Hometrack House Price Indices are revisionary i.e. there are revisions each month as more data comes available as sales are registered and further information becomes available.   The scale of monthly revisions tends to be larger for smaller geographies where sales volumes are lower and indices can be more volatile over time. The historic revisions are minimal for the largest geographies.

No, the series are supplied on a non-seasonally adjusted basis ensuring the index reflects the actual change in house prices over time.  Users wanting to adjust the actual price changes are able to run a seasonal adjustment algorithm if required. 

The primary output of a repeat sales regression index is a monthly ‘multiplier’ which reflects the price change over the period.  These price changes are then applied to an average price to create a time series for average house prices. Hometrack calculated the average price of housing in all the geographies covered by the indices in December 2013. The monthly indices are used to adjust the average price in December 2013 both forwards to the latest index period and retrospectively back to January 1995. 

All our average prices and percentage changes are expressed in nominal terms and not adjusted for inflation.

The geographic definition of a City is based upon Primary Urban Areas – these are areas that cover the built up area of a city or city region.  Primary Urban Areas for English cities were defined in a report published by the UK Government entitled The State of the English Cities Volume 1, ODPM, 2006 (download it here).  

All cities are based upon amalgamations of single or multiple local authorities. The process of extrapolating the Primary Urban Area methodology for major cities across the rest of the UK can be deployed for Scotland, Wales and Northern Ireland.