Read about the fall and rise and fall and rise of house-price growth.
If I was to believe, as the press seems to, that each monthly rise and fall in property-price growth reflected a real trend, I'd have believed over the past few months that price growth was rising and falling and rising and falling and rising again, but most of all I'd be a deeply confused and perhaps psychotic individual.
Take the six sets of data that have come out of the Department of Communities and Local Government (CLG) this year, for example. In January, they reckoned annual house price inflation was 10.9%. In February, they said it went up to 11.8%. It then went back down to 10.9% in March, up to 11.3% in April, down to 10.9% in May and up to 12.1% in June.
CLG's House Price Index 2007
Month | Annual inflation |
|---|---|
June | 12.1% |
May | 10.9% |
April | 11.3% |
March | 10.9% |
February | 11.8% |
January | 10.9% |
As each set of data was released, it was immediately followed by articles talking about rising, falling, rising, falling and rising house price growth, with additional schizophrenic commentary about what this means: a market crash is imminent, house prices are set to rocket, there won't be much more growth this year, growth will continue to gather pace, properties are unaffordable, we can still afford to buy our homes.
The CLG's index is relatively new, but these sorts of conflicting data on a monthly basis are common to all indices and reports.
Bewildering property data is not just a phenomenon of 2007. Taking a quick glance over old financial press releases, I see one from Nationwide from back in mid-2006 called `House Price Growth Sluggish' followed by another from the building society later in the year called 'House Price Growth Moves Back Into Double Digits'.
The truth is, we can't read too much into monthly reports. What we can do is gather it all up to see what the general trends have been, and it doesn't take a genius to work out that, for quite some time now, in most areas property prices have been rising pretty rapidly for years. (10-12% annual rates in the first half of 2007, according to CLG.)
Sadly, even collecting the data in this way, it still tells us only about the past and not the future. The short-term future can go anywhere at any time, as I explained in 40% House Price Rise Unlikely.
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> If you enjoyed this article, you should like Why I Don't Trust House Price Indices and Reassuring Property Predictions.