Are house prices in Scotland rising, falling or standing still? With three reports this week giving apparently different views of the market, anyone is entitled to feel a little confused.
First off, the RICS reported that ‘House prices jumped once again last month’ (meaning October). You can see that report here.
Later that day the Office for National Statistics (ONS) said that prices in Scotland had fallen by 1.1% over the last year (up to the end of September). You can see that report here.
Shortly afterwards, Acadametrics said that prices in Scotland were £647 higher now than the same time last year (also September), up by around 0.4%. You can see that report here.
So, what is really going on?
Despite the apparent differences, the ONS and Acadametrics are pretty much on the same page. And the RICS survey also makes sense if you put it in the right context.
Take a look at the table on the right which shows the ONS and Acadametrics analysis of price changes in Scotland since 2011. Acadametrics gives actual figures while the ONS figures are an index.
In both cases, prices now are below where they were at the start of 2011. In both cases, the actual changes from month to month and over the last two and half years have been relatively minor. In both cases, there has been a cycle of rises and falls in price with no clear sign of a trend. The differences between them are pretty marginal and there is no clear sign of a trend.
But that may be about to change. By next month, both of them are almost certain to be reporting prices higher than they were this time last year. Moreover, it looks quite possible that that will be true for every month from November to next March. That’s largely because prices in those months last time round were so weak.
In short, the minor differences between these two reports are likely to be resolved by results for both which show that house price inflation (i.e. the change over the most recent 12 months) is firmly in positive territory at some point in the New Year. That doesn’t mean that prices will rise in successive months – just that prices will be higher in those months than they were in the equivalent month a year earlier.
The RICS survey would fit neatly with that emerging consensus. Unlike the other two, this is based on opinion, rather than mortgage offers or selling prices. The RICS asks its members: Indicate by how much average house prices have changed over the last three months. Surveyors are asked to choose between the following answers: falling, the same or rising.
As you will see, that doesn’t ask surveyors to indicate how quickly or by how much prices have changed. The report assumes that prices are rising when more surveyors report prices rising than report prices falling. But it is impossible to say by how much they are rising. Even if every surveyor reported prices rising, it would still be possible for that rise to be very small.
The importance of the RICS survey is that it provides a measure of market sentiment; are things looking more or less buoyant than they were? In that sense, it looks to the future while reports based on sales refer to what has already happened.
If the reports for October to March from Acadametrics and the ONS do go on to show prices above the level recorded at the same time last year, as I suspect they will, that would be entirely consistent with what the RICS is telling us now.
That doesn’t mean that prices are about to rise sharply or even continuously. Prices could still fall in some months and remain higher than they were in the same month a year ago. Moreover, average prices remain below where they were in 2011 and well below where they were in 2007.
Nevertheless, all of these reports, in their different ways are telling us is that prices have stopped falling and are now on a firmer footing.