The Bexley Borough House Price Index: 177.32

I had a most interesting conversation the other day with a local Bexley accountant, who asked me about my articles on the Bexley Borough property market. It was quite humbling to be praised by such a professional, who commented enthusiastically on them! He was particularly interested in my graphs, facts, and figures; so much so he recommended his clients read them, as most of them were either Bexley Borough homeowners or landlords, and often 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 Bexley Borough?”

To start with, there are indeed a great number of these indices, including the Land Registry, Office of National Stats, Halifax, Nationwide, and LSL. The issue occurs when these different indices give diverse pictures of the state of the UK housing market. Whilst some 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 of a ubiquitous tin of beans can easily be measured over the months and years), is that every home is unique and, as Bexley Borough people are only moving every 20 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 Bexley Borough property market, it is important to look to the medium term when considering house price inflation/deflation. 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 property prices will have dropped. Let me tell you, no property market indices are representative of the housing market in the short term. Many have shown a drop around the Christmas and New Year months, even in 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 Bexley Borough Property Market, and can there be a Bexley Borough House Price Index?

To calculate what I consider to be a fair and proper House Price Index for Bexleyheath, I initially needed to decide on a starting place for the index. I have chosen 2008 as far enough away, but still gives 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 you see a table for the DA6 postcode district (the sample shows 2008, 2016, and 2017).

	2008	2016	Proj 2017
Detached	15.6%	10.7%	11.2%
Semi Det	23.0%	31.3%	43.9%
Terraced	24.6%	22.7%	17.8%
Apartment	36.9%	35.3%	27.1%

Apartment

36.9%

35.3%

27.1%

Then I look at the actual numbers of properties sold in the DA6 postcode district. Below is the graph with the numbers for the years already mentioned.

Next, I looked at the prices paid for those types for every year since 2008, again in this example using the sample years of 2008, 2016, and 2017 for the DA6 postcode.

Finally, I amalgamated the same data points for the other postcode districts covered by Bexley Borough and weighted it accordingly, to produce the Bexley Borough House Price Index. After all that work, for Q4 2017, it currently stands at 177.32 (Q4 2008 = 100).

I hope you found that of interest. Over the coming months and seasons, I shall refer back to Bexley Borough House Price Index in my Property Blog: www.bexleyproperty.co.uk to give you a flavour of what is really happening in the Bexley Borough Property Market.