UK House Prices Still Rising According to Government Index

UK house prices rose again in August according to the latest release of the government index ran by the Department for Communities and Local Government.

The DCLG index, which is based on mortgage completions in August recorded a 0.5% increase in house prices on the previous month, though prices are still over 5% lower than August last year the report says.

Perhaps most interestingly the quarterly index showed a 2.7% increase in house prices in the 3 months ending August. This is in contrast to the 1.7% fall in house prices in the three months ending May.

The DCLG index mirrors all the major indices, with the exception of the Land Registry index, which is based on completed sales and showed a 0.1% contraction in house prices in England and Wales in August.

The Land Registry index is still the most accurate, but unfortunately it is extremely lagged behind the other indices, and unfortunately it only covers England and Wales; Scottish housing market is performing much better and this could account for the rises in the other indices, according to Richard McKay director of private property sales portal Zungalow.com.

"Scottish house prices are currently only 0.8% lower than last year according to the DCG index. Scottish house prices have never fallen as fast, and they didn't fall as far as the rest of the UK. Thus, the DCLG index including Scotland in its overall index could well be influencing the rise, as it could in all the other indices except that of the Financial Times," he said.

It will be very interesting to see what the next release of the Land Registry index shows on the 28th of this month. If it shows another fall then it looks even more likely that it is Scotland's inclusion in the other indices that is propping up prices, as well as gains fuelled by short supply in the south of England.