Rightmove Index is Not a Measure of House Prices

They're doing it again! Rightmove has issued the figures from its asking price index for September, showing that asking prices are on average 1.5% lower than a year ago, and the press are headlining things like House Prices Down 1.5% Year on Year.

Firstly, the Rightmove index does not measure house prices in the traditional sense of the word, and secondly, the Rightmove index is not even an accurate measurement of asking prices, let alone sale prices.

Okay, I know that almost every property sold in the UK is advertised on Rightmove, and there isn't much -- if any -- competition when it comes to measuring asking prices. But, Rightmove (in my opinion strategically) releases the data on asking prices as they are added to the site, not on its database as a whole.

As Rightmove itself admitted in earlier releases of the index, estate agents are known to suggest an initial asking price at far more than the market will bear (far more than it will sell for in the current market) so that the vendor will go ahead and give them the instruction. Rightmove says that asking prices tend to fall in subsequent weeks and months. At about the same time, I worked out that the average asking price of properties added to Rightmove was 40% higher than the average sale price according to the various indices.

Now there is no mention to the fact the vendors may be putting their property on the market at a price driven by false expectation than realistic saleability. Simply the same old story of short supply driving up prices in the affluent south west, and things still negative in the north because of the depressed mortgage market.

According to Richard McKay, director of private property sales community Zungalow.com, Rightmove's asking prices have always been falsely high because of vendor's unrealistic expectations, but that this is worse now there are signs of recover. He said:

"Asking prices will always tend to give you a skewed picture of the housing market, when times are good people get greedy, and when times are bad people refuse to admit defeat. Now asking prices are getting inflated again because things are starting to look a bit better and seller's are trying to capitalise."

Richard is a frequent commentator on the housing market, famous on Write about Property for saying that you can do just as well out of a downmarket as you can a strong one. You just have to remember that the house you're buying will have fallen in price just as much as the one you are selling.