House price index will exclude any cash sales
THE house price index being launched by the Government will not include houses bought for cash, despite this accounting for up to half of all house sales for some estate agents.
Last night, auctioneers said that although the creation of our first property price index was to be welcomed, there were many black holes in the Government's attempted measures to index and stabilise the housing market.
The first house price index will be published on May 13, but it will not include actual house prices nor will it measure price trends among cash buyers.
The index will only show the percentage change in price trends compared with previous months and how these changes impacted only four sectors of the market -- Dublin houses, Dublin apartments, outside Dublin residential price changes and overall national price trends.
It will base this information on prices supplied by some of the banks for mortgages drawn down by home buyers -- but will not include any figures from some mortgage providers, including Ulster Bank. It will also not include cash sales.
The figures will be compiled by the Central Statistics Office (CSO) and will be similar to the statistics they compile for the cost of general goods, which simply show percentage rises or falls.
Estate agents have welcomed the creation of the index as it will provide some indication as to whether prices are continuing to fall in these market sectors and it will also help to show when the market appears to be bottoming out.
However, the index will miss out on trends in an increasingly vital sector -- cash buyers - despite the fact that the Revenue Commissioners are collecting information on those who buy properties outright. At the recent auction of distressed properties cash buyers are estimated to have bought about two out of every three homes that were sold.
Fintan McNamara, chief executive of the Institute of Professional Auctioneers and Valuers, said that cash buyers now account for a greater proportion of the market because prices have fallen.
"Because of how banks are being so selective about whom they will lend to, cash buyers are now in pole position," he said.
A spokesperson for the Real Estate Alliance said that between 40pc and 50pc of the recent house sales were to cash buyers, adding that the recent distressed auction also proved that cash buyers prefer to buy cheaper properties, including houses which need substantial refurbishment. Consequently, cheaper properties will be missing from the new index and this may set the house prices trends at a higher level than they actually are.
A spokesman for the CSO said that it would receive information from the Revenue Commissioners which is also collecting house price figures based on stamp duty records.
Similar figures are being compiled by The Property Registration Authority.