Property Prices and Loans
Cardboard Box? You were lucky. We lived for three months in a paper bag in a septic tank - from Monty Python’s “Four Yorkshiremen” sketch.
House Price rises! I’m fed up of reading about ‘em, fed up of hearing about ‘em and fed up of tying my brain in knots thinking about ‘em, but my profession sadly dictates that I have to take an interest in ‘em.
Following on from my post about automatic valuation systems (AVMs) I’ve been doing a little bit of digging around the Land Registry website, primarily to try and understand what the complicated words of ‘regression’ and ‘hedonic’ meant in terms of doing automated valuations.
What I found was that the Land Registry seems to have data about all property sales since around April 2000 and has built up a database of around 7 million property transactions. The data is stored so that you can do a quick analysis of the property trends in a given area. What I discovered was that in nearly all the regions I looked at, there has been a rapid rise in property prices, but the volumes of houses being actually sold hasn’t risen uniformly since around April 2004.
Now this is probably too difficult a subject to discuss on a blog, but its interesting all the same, that the same date for the trend change is found in all the regions I checked. Maybe if I get another quiet Tuesday afternoon, I’ll spend some time thinking about why.
The Land Registry database now has a match of 1.5 million transaction pairs, meaning that the same house has been bought and sold at least twice since the data started to be recorded. This gives a very accurate figure for price increases in a specific area and this data is being used more and more in AVMs and forms the ‘regressional’ part of its calculation.
At the end of the day this type of calculation helps loan providers give a more accurate assessment of Loans To Value (LTV) or perhaps we should call it Loans to Present Value.
