United Kingdom House Price Index (HPI) y/y

House Price Index y/y measures changes in the average value of residential properties in the given month compared to the same month of the previous year. Information on residential property transactions is collected from state land registries and statistics from the largest UK mortgage lenders.

The index calculation is based on prices paid by individuals for house purchases. The following registrations are excluded from the calculations:

• Commercial transactions
• Sales that were not for full market value
• Refinancing of existing mortgages
• Sale of a share in a property
• Transfers by way of a gift, under a Compulsory Purchase order, under a court of order
• Other transactions not for full market value

The collected dataset containing the property sale price does not take into account physical characteristics of houses (type of property, size, location and market category). Therefore, hedonic regression and mix-adjustment is used in index calculation. Also, the index is seasonally adjusted (since the property market is very sensitive to seasonal changes).

The index characterizes the state of the real estate market. Due to seasonal adjustment, HPI changes show almost pure inflation in the UK property market. The rise in housing prices is a favorable factor for the national economy, as it speaks of an increase in sterling inflation. Therefore, the HPI growth is seen as positive for British pound quotes.