Impact

Analysis of housing market trends and the measurement of house prices.

Date: 12 June 2014
Contacts: Daniel Chandler and Richard Disney

In response to growing public interest in the housing market, IFS researchers carried out a review of recent housing market trends and policies as part of the annual Green Budget. Through this report we helped to clarify the debate about a potential house price bubble, by setting out how economists think about ‘bubbles’ in general, and by drawing attention to important facts, such as the significant regional differences in recent house price growth, and the distance of real (as opposed to nominal) house prices from their previous peak and longer term trend in most of the country. We also provided an initial assessment of the Government’s Help to Buy and (revamped) Right to Buy policies. The report had considerable policy impact and was referenced heavily in the Treasury Select Committee’s report on the 2014 Budget.

Following on from this, we carried out a detailed analysis of the various measures of house prices. These measures are some of the most widely reported economic statistics, but can create a confusing picture due to the sometimes significant differences between them. Our briefing note brought much-needed clarity to the reading of house price measures. The research set out why the indices differ and how this relates to differences in the data they use and their underlying methodologies (highlighting the fact the some measures are simply measuring different things, and as such we would expect them to differ). This report gained significant interest in the media and was the topic of a discussion with the author on Radio 4’s You and Yours programme. It was also quoted heavily in a recent Acadata briefing note, in which it was described as 'a definitive study of house price indices'.