The average house? There’s no such thing …
If you follow the property press, you’ll be aware that, at around the same time every month, there’s a flurry of reports on property prices.
Halifax, Rightmove, the Royal Institute of Chartered Surveyors and quite a few of the national estate agents all release the own house price indices, pegging the average house price at a certain level.
The thing is, even though everyone has the same data available, the way they interpret the information differs. As a result, they rarely come up with the same figure.
So, rather than clarity, we end up with confusion; if you’re about to sell your home or invest in one, how can you be sure what constitutes a fair price if even the so-called “experts” can’t agree?
As an example to illustrate what we mean, let’s select ten homes from our portfolio which we’ve taken instruction on recently:
1/ A three-bedroom, semi-detached home in rural Lincolnshire: £175,000
2/ A Grade 2 Listed, two-bedroom, end-terrace in North Yorkshire: £230,000
3/ A two-bedroom bungalow in East Yorkshire: £100,000
4/ A two-bedroom, terraced home in Manchester: £180,000
5/ A three-bedroom, end-terrace in Manchester: £135,000
6/ A four-bedroom, semi-detached home in a village location near Coventry: £399,500
7/ A one-bedroom apartment in Kent: £260,000
8/ A three-bedroom, detached home with separate annex in West Yorkshire: £415,000
9/ A two-bedroom bungalow on the Yorkshire coast: £174,000
10/ A one-bedroom apartment in south London: £500,000
The first thing which ought to be immediately obvious is that location and condition play a huge part in the valuation of a property.
A flat in London will always fetch more than a semi-detached home in the north-east; equally, an immaculately-presented, two-bedroom terrace will nearly always trump a rather tired, three-bedroom semi-detached house in need of some TLC.
So what, exactly, comprises and “average” home? We’d respectfully suggest it’s almost impossible to pin it down as properties tend to be just about as individual as we are.
Secondly, each of the indices could be based on different figures. For example, if you add up the ten valuations above and divide by ten it’s easy enough to calculate an “average” price of £256,850, which sounds about right.
The things is not all those properties have sold yet so £256, 850 is the average asking price, not the average selling price – two completely different things.
So, if we to recalculate on that basis, totting up the just the asking prices on only those properties which have been sold subject to contract, then we’ll come up with a completely different figure of £154,500.
However, even then, there’s a good chance your figures are not going to be strictly accurate as they’re still based on asking price and not the price the house actually sold for. The only way get a more accurate assessment would be to visit the Land Registry’s website and to search for the latter, which involves a small fee.
Of course, few commercial estate agents or lenders will want to incur that sort of cost every month so perhaps the best bet would be to have a look at the figures released by the Office of National Statistics; at least the Government agency has easy access to accurate data on selling prices.
But, even then, it’s hard to say whether the ONS is comparing eggs with eggs. As we’ve already established, location and condition are huge factors when it comes to property values. Also, one high-value sale – a single home selling for several million pounds, for example – could skew the figures as well.
So, if we have a message at all when it comes to evaluating data on “average house prices” it would be to take the indices with a pinch of salt.
It’s fair to say house prices in the UK are still rising year-on-year – although perhaps not as fast as they were. But, when it comes to a definitive valuation on a three-bedroom, semi-detached house, there’s probably no such thing.
Of course, your estate agent’s knowledge and experience should help you to tread that fine line between a fair price which will attract buyers and satisfy your own expectations – but bear in mind the property market is a fluid thing and that figure could change, sometimes in a matter of days.
If you’d like some no-nonsense guidance, feel free to give us a call or drop us a line; we’d love to help if we can.
In the meantime, if you can help us, we’d appreciate a share of this post on your social media channels. We’ve built our blog piece by piece one small share at a time, but another would definitely help spread the message. If you enjoyed this post and think others might find t useful, please feel free to pass it on.