JERSEY, C.I. – Did you know house prices in Jersey are now as high as in London? Don’t believe the hype.
The story came from a press release circulated by Jersey-based mortgage broker Skipton International.
It matters because housing is such a big issue in Jersey and feeds into most others. About half of islanders can’t afford to own the roof over the heads. Meanwhile, many nurses, teachers and social workers thinking of coming here avoid the island, in part because they know they’ll struggle to buy.
In a nutshell, Skipton International claims to have produced a new house price index which shows that the average price of property in Jersey is now the same as in London, ie: £456,000, give or take a few bob.
That’s a lot of dough, and the news probably didn’t surprise a lot of people in Jersey. But it surprised me because I’m one of those sad sorts who traipses down to the States Statistics Unit every three months to hear what they have to say on the same subject.
During my last traipse, in February, they said – click here for the details (page 15) – that while the average home in Jersey does indeed cost £456,000, the average in London is a whopping £534,000.
That suggests London is actually 20% more expensive than Jersey.
So how did Skipton International arrive at such a different result?
To find out, you have to look at where the numbers come from.
The States’ statistics guys get most of their Jersey-related house price data from the Royal Court.
Given that property transactions are publicly approved in court (on Fridays) anyone who’s interested can easily find out exactly how much every house sold for.
Then our statistical heroes put the data together in line with guidance from the Office for National Statistics (ONS) in the UK.
That helps them compare like with like, especially given that they get their London data from none other than the ONS.
Turning to Skipton International. The mortgage broker gets its Jersey numbers from…. wait for it…. the States Statistics Unit. Presumably that’s why it arrives at the same conclusion as far as Jersey is concerned.
However, when comparing Jersey prices to London, Skipton uses the Nationwide House Price Index for the mainland part of the equation.
There’s nothing wrong with the Nationwide House Price Index. It’s been doing the rounds for eons, and the UK’s biggest building society is involved in many property transactions so it’s a pretty fair bet that if the Nationwide Index is going up or down, that’s a fair-ish reflection of the wider market.
However, the Nationwide only has access to mortgage data from its own customers (sorry, members). Nationwide’s index is therefore based on the value of mortgage approvals for people who have chosen to take out their mortgage through the Nationwide. See where this is going?
That throws up two problems. One is that according to the Nationwide’s own methodology it has to estimate actual house prices as opposed to knowing them. The Nationwide data is not backed up by completed transactions, as the data is in Jersey.
The second problem is that the Nationwide is a member-owned building society. Nothing wrong with that – in fact, it’s a great idea – but can we be confident that it is a universally popular mortgage provider for all sectors of the market? Do partners at law firms and investment banks, for example, take out their mortgages with the Nationwide?
Maybe they do, but there’s no way for us to tell from the data provided.
Perhaps that’s why the States Statistics Unit gets its London house price data from the ONS.
The ONS also relies on mortgage information but there are two advantages to the ONS way of doing things. One is that the ONS relies on mortgage completions – not approvals – and the second is that the ONS gathers information from across the market, not just one provider.
Here in Jersey we don’t have to estimate what average property prices are, because all (most) property sales have to be approved in the Royal Court on a Friday.
If it’s absolutely necessary to compare one place with another, then it’s equally necessary to be careful how you do so.
The UK is big and difficult to analyse but if you have to pick one way of putting a number on the average house price there should you pick the measure chosen by every policymaker between Shetland and the Scilly Isles, or should you pick the one sent out in a press release by a company that sells mortgages?