The Southampton House Price Index: 145.63

The other day I had the most interesting conversation with a local Southampton accountant, who asked me about my articles on the Southampton property market. It was quite humbling to be given praise by such a professional, when he commented enthusiastically on the articles I write. He was particularly interested in the graphs, facts and figures contained within them, so much so that he recommends his clients read them, as most of them are either Southampton homeowners, Southampton landlords or oftentimes both. However, one question that kept me on my toes was, “With so many house price indices, how do you know which one to use and how can you calculate what is exactly happening in Southampton?”.

To start with, there are indeed a great number of these indices, including the Land Registry, Office of National Stats, Halifax, Nationwide and LSL to name but a few. The issue occurs when these different house price indices give diverse pictures of the state of the UK housing market. Whilst some indices measure the average value of every property in the UK (sold or unsold), others measure the average ‘price-paid’ of houses that happen to be sold over a fixed time scale… confusing isn’t it!

A lot of the variance between house price indices occurs because of the distinctive ways in which the numerous indices endeavour to beat these issues. You see, the biggest problem in creating a house price index, when comparing and contrasting with most other indexes, (e.g. inflation where the price is a ubiquitous tin of Beans which can easily be measured over the months and years), is that every home is unique. And as Southampton people are only moving every 13 years, it appears the only thing that can be measured is the price of property sold in a given month.

By their very nature, all of the indices are only able to paint a picture of the whole of the UK or, at best, the regional housing market. As I have said many times in my articles on the Southampton property market, it is important to look to the medium term when considering house price inflation/deflation. When looking at the month-to-month jumps, many indices look like one of those jumpy lie-detector needles you see in the cold war movies! 

I can guarantee you that in the coming few months, on a month-by-month basis, one or more of the indices will say that property prices will have dropped. Let me tell you, no property market indices are representative of the housing market in the short term. Many indices have shown a drop around the Christmas and New Year months, even during the boom years of 2001 to 2007 and 2013 to 2015.

So, back to the question, how do we work out what is happening in the Southampton Property Market and can there be a Southampton House Price Index?

To calculate what I consider is a fair and proper house price index for Southampton, I initially needed to decide on a starting place for the index. I have chosen 2008 as far enough back, but still giving us a medium/long term view. Next, I split all the house sales into their types (Detached/Semi/House /Apartment) to give us an indication of what is actually selling by postcode district. So, for example, below is a table for the SO15 postcode district (the sample shows 2008, 2016 and 2017.

	2008	2016	Proj 2017
Detached	7.8%	7.2%	6.9%
Semi Detached	31.3%	28.1%	25.2%
Terraced	25.3%	19.4%	23.5%
Apartment	35.6%	45.3%	44.4%

Then I look at the actual numbers of properties sold in the SO15 postcode district. Below is the graph with the numbers for the aforementioned years.

Next, I have looked at the prices paid for the different property types during every year since 2008 again, in this example, using the sample years of 2008, 2016 and 2017 for the SO15 postcode.

Finally, I amalgamated the same data points for the other postcode districts covered by Southampton and the surrounding villages, weighted it accordingly, to produce the Southampton House Price Index ... which after all that work, currently stands at 145.63 for Q4 2017 (Q4 2008 = 100).

I hope you found that of interest. Over the coming months and seasons I shall refer back to the Southampton House Price Index within my Southampton Property Blog to give you a flavour of what is really happening in the Southampton Property Market

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