Letter: Reality check for property reports

For some time now I've been preaching to my clients that the various house price surveys are irrelevant to what is actually happening in the market and what is happening in relation to prices. If my firm last month sold ten houses at 100,000 each and this month sells nine houses at 100,000 and one house at 1,100,000 then in April the average price of houses sold was 100,000 and in May it's 200,000.

That does not mean that between April and May real house prices have doubled. All it means is that the average price of the particular group of houses sold in one month is different to that in another month. The reality is that what makes the average price change month to month is largely changes in the make-up of the group of houses having their prices averaged that month. More big houses and fewer wee ones pushes up average price, and vice versa - all totally irrelevant in relation to real prices.

Given all of the above it's perhaps not surprising that some of those monitoring these monthly stats conclude that there are "mixed" indicators in relation to the housing market as "prices" go up three months out of six but down in the other three. The reality is that the fluctuating "results" are statistically spurious. Month after month we get supposed experts trying to draw conclusions in relation to real house prices based on statistics from which such conclusions simply can not be drawn. That's not to say that the "conclusions" are always wrong but it is to say that when they are right it's due to good luck and coincidence.

Andrew R Diamond, Partner, MacLachlan & MacKenzie, Edinburgh