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Real Estate: How Valuable is a Single Number when Trying to Understand UK Property Price?

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Good value? Property price (Pexels)

New ways to determine a property price should be explored as traditional assessment methods don’t tell the whole story

Nationwide has released its May United Kingdom property price assessment and determined that over the course of the month, the annual growth in the average UK property price fell from 3.7 per cent to 1.8 per cent. 

This is the fastest fall rate since the financial crisis and many have cited the reason being that prospective buyers would wait six months before returning to the housing market leading to a collapse in demand.

But is this number, which is published monthly by a number of outlets, useful if you want to know if the price of your own house or flat, or the house or flat you might wish to buy is going up or down?

Using data from Bricks&Logic’s property price estimates, we are able to examine the likely price movement for millions of properties in London on an individual basis.

What we see is that even in London – which is only a subset of the wider UK data – there is substantial variation in monthly price changes. 

Figure 1. Percentage change each month Feb-19 to Jan-20 (London)

Figure 2. Adding the monthly percentage change for NW6 and E3 districts

So in this case, we can see that based on “where you are” in London, the performance varies substantially from the average in most months.

In one of our blogs, we discussed how different property types and value ranges also behave quite differently across London which has the effect of magnifying these location differences.

If we have a look over a longer period of time, we can see that this isn’t a temporary effect on property price either and the impact of these differences over a longer period of time can be quite extreme.

In Figure 3, we can see the monthly performance of two different types of flat in two very different areas of London, an ex-council flat in Leyton versus a period flat in Kensington.

And in Figure 4, we can see how these monthly changes would accumulate over the ten years.

Figure 3. 10 Years of monthly change for two types of flat in different parts of London

Figure 4. 10 years cumulative change for the same two flats

So with a cumulative growth of over 120 per cent for the ex-council flat in Leyton versus just over 40 per cent for the period flat in Kensington, the differences in monthly change can clearly add up to very stark differences in price over time. 

While broad numbers are useful to get a “feeling” for market sentiment and health, the variation within the average is substantial. Nobody – aside perhaps from the large investors – owns the average UK property, nor indeed is anyone seeking to buy one.

Within London alone, there are huge differences contained within average monthly change and these differences can accumulate into substantial price change differences over time.

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