This is a case study for Principle Q2: Sound methods.
The UK House Price Index (UK HPI) has been published since June 2016 and is produced by HM Land Registry in partnership with the Office for National Statistics (ONS), Registers of Scotland and Land and Property Services Northern Ireland (referred to as HM Land Registry and partners).
The method used to produce the UK HPI was originally published in Development of a single Official House Price Index which set out the rationale for the approach, the data sources used and how it complied with international standards. It also considered users’ questions raised during an earlier methods consultation and from a peer review conducted by the Government Statistical Service Methodology Advisory Committee.
Each month, the UK HPI presents a first estimate of average house prices in the UK based on the available sales transactions data for the latest reference period. The first estimate then updated in subsequent months as more sales transaction data become available for inclusion in the calculation.
In March 2017, there was a large increase in the magnitude of revisions between first and subsequent estimates of annual change to average house prices. This negatively affected some users’ confidence in UK HPI as they were unable to understand or explain house price trends using the first estimate with certainty. After investigating, ONS established that they were being driven by volatility in new build property prices, compounded by an operational backlog in HM Land Registry registering new build sales transactions.
HM Land Registry and partners took steps to improve the methods by changing the calculation for the first estimate to reduce its sensitivity to the impact of new build transactions. The approach was developed by GSS methodologists, and several options were tested before a final one was chosen.
HM Land Registry and partners communicated the method change to users prior to its implementation through the About the UK HPI section of the UK HPI release, a blog, and later produced an enhanced Quality and Methodology report which includes details of the impact of the changes and supporting analysis. Details about the HM Land Registry operational backlog have also been included in Section 4.4 of About the UK HPI, with a reference to HM Land Registry’s speed of service and its future plans, which present information about average completion times for new build registrations.
As a result, the scale of revisions to the first estimate of UK HPI annual change to average house prices has reduced, and is more stable over time. HM Land Registry and partners and UK HPI users are now more assured that delays in processing new build registrations are not adversely impacting on the robustness of the UK HPI first estimates.
HM Land Registry and partners also compare UK HPI with other non-official house prices indices to identify and explain any differences between the series, and publish their analyses in an annual article Comparing house price indices in the UK.
This example shows how HM Land Registry and partners have transparently developed UK HPI’s methods by collaborating with relevant experts during their development, informed users in advance about methods changes with clear reasons and explanations of their impact, and published supporting information that helpfully sets out the rationale behind their various decisions.