The latest house price index from the Office for National Statistics shows that UK house prices rose 1.4% between April 2011 and April 2012, but this by no means tells the whole story.

Now before you get suckered in by all the housing industry talk of resilient or recovering house prices based on this one figure you need to look at the ONS HPI report itself, which calls this ‘relatively little growth’.

But there was no overall growth. In fact there was shrinkage in real terms. Why do I say that? Because the ONS CPI annual inflation from April 2011 to April was 3% and the RPI, which takes housing costs into account, was 3.5% over the same period. So house prices can’t even match inflation.

Then there is the catch that the overall average house price rise of 1.4% across the UK was skewed by the fact that house prices rose in England by 1.7%, but fell in Wales by 1.1%, fell in Scotland by 0.3% and fell in Northern Ireland by 8.1%.

Then let’s look at the prices in England. These were skewed by a 4.9% rise in London, a 2.1% rise in the South East and a 1.6% rise in the South West.

So house prices rose in the London area and beat inflation on the way. Prices went up in the South East and South West of England but could not keep pace with inflation. And house prices fell everywhere else.

To put it bluntly, anyone who bought a house outside of London over the last year is looking at a loss on their purchase.

You can see from the graph of the index (non-seasonally adjusted) since Jan 2011 below that, in overall terms, the index is flat. You can’t use the raw house prices as the mix of property used every year changes and are not comparable, but the index is ‘chain-linked’.

Don’t you just love broad-brush headline figures? Well the industry does as it’s good for sales.

ONS HPI-click to enlarge

ONS HPI-click to enlarge

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