National Statistical

The housing market is very much under the spotlight at the moment with interest rates and house prices capturing the attention of the media as well as those wanting to move or step onto the property ladder for the first time. As new houses are built and the housing needs of people in the UK evolve, we see changes in the mix of properties being bought and sold which is an important factor for how we measure the change in house prices via the UK House Price Index (UK HPI). Chris Jenkins explains how we are evolving our methods to ensure we are keeping up with current trends which include a shift towards smaller and cheaper properties.   

Measuring house prices and capturing how the market is changing over time can be a challenging process, as we have explained in a previous blog.   

Identifying the ‘average house’  

When we measure house price inflation, one challenge we encounter is the lack of repeated sales for an individual property, with which we can calculate a change in price. For example, if a two-bedroom semi-detached house in Yorkshire sold in January 2025, it is unlikely that exact same property will be sold again for a long time.  

We can’t directly compare this sale with subsequent sales in February 2025 as the type of properties that sell in February will be different. If we compared the two-bedroom property above that sold in January, with a four-bedroom detached house in Westminster that sold in February, we would see a big change in price caused by changes in the property characteristics, rather than pure price inflation, which is what we want to measure. 

To overcome this we apply some well-established, and internationally recommended methods to capture just the inflationary (pure price) change in house prices. These methods allow us to use information drawn from the latest properties being sold each month to estimate a ‘constant quality’ measure of UK house price inflation – constant quality here means we are stripping out the impact of compositional changes for each period. 

Updating the evidence base  

One aspect of our methodology is the use of a ‘reference’ set of properties as a baseline that is then uprated over time using the ‘constant quality’ change in prices we calculate as described above. This approach means we are measuring the ‘price of an average property’ based on this reference period. 

When we developed the UK House Price Index (UK HPI), we set our reference period to January 2015. However, we know that trends in the types of property being sold can change over time, and therefore this reference should be periodically updated to reflect current trends in the housing market and to avoid being out of date.  

We had initially proposed to update this reference every five years. However, this would have meant using a reference period in 2020, when the UK housing market was impacted by the COVID-19 pandemic, and led to changes in housing preferences. Transactions during this time were atypical compared to usual trends. We took the decision to delay this update until the housing market returned to more normal times. 

The reference period was updated to January 2023 in the UK HPI release published on 19 February 2025. This re-referencing ensures the UK HPI average price levels better reflect the types of properties currently being sold.  

The impact of re-referencing 

As is typical with any such re-referencing, the update shifted the price levels in the historical data by a constant percentage, but did not affect published historical inflation rates (how much prices have changed over time). In the case of the UK HPI, updating the reference period to January 2023 meant our measure of average price shifted to reflect changes in the types of property being sold more recently, compared to sales in January 2015. To coincide with this change, we also reset the index reference period for the UK HPI to equal 100 in January 2023. 

UK HPI weights show that between 2015 and 2023, UK sales of smaller properties proportionately increased (e.g. proportionately more sales of flats and maisonettes rather than detached properties), and sales in more expensive parts of the UK proportionately decreased (e.g. proportionately more sales in Scotland than in London). This means that the “average” UK property sold in 2023 tends to be smaller, and in a cheaper part of the UK, than the “average” UK property sold in 2015.  

Updating the UK HPI reference period from January 2015 to January 2023 allows the UK HPI to better reflect this change. The reduced weight of large, expensive property prices on the UK average has led to a 7.9% downwards shift for the entire average UK price level series, with inflation rates being unaffected by re-referencing. 

As our house price index approaches 10 years of production, we will continue to review the data sources and methods used to ensure we are accurately capturing the evolution of the housing market in the UK.