Posted on 22 November 2016 by
Today’s October Housing Transaction figures from HMRC provide further evidence of the how manipulating (or to use the technical term “seasonally adjusting”) the actual figures can result in misleading impressions being promoted, especially when, as in this cases, the accompanying comment is primarily based on the manipulated figures, with just a brief mention at the end about the real figures.
None of this is to say that there aren’t seasonal variations in property activity but activity is affected by several other factors as well, both short term issues like the 3% stamp duty surcharge in April and longer term ones like the availability of finance and interest rates.
In my opinion anyone, including economists, and even economic professors, who claims they can accurately determine what proportion of a change in the number of property transactions, or indeed house prices, is due solely to seasonal factors as opposed to other factors, is deluded.
Taking today’s property transaction numbers as an example of an exercise in how to mislead the public the initial estimate (the figure is always revised as more information comes in) of the actual number of transactions in October 2016 was 100,300. This compares with 106,940 in September 2016. The figures for the same months in 2015 were 119,950 in October and 109,160 in September. So in September 2016 there was a fall of 2,220 (2.0%) compared to September 2015 but in October there was a much larger year on year fall of 19,650 (16.4%).
However, anyone simply looking at the manipulated figures would get the impression that there was little change in October because the seasonally adjusted figures are: Sept 2015: 105,640; Oct 2015: 106,120; Sept 2016: 96,630; Oct 2016: 97,640.
So in the real world year on year transaction numbers fell by 16.4% in October 2016, compared with a fall of only 2.0% in September, whereas in the world of economists’ imagination the year on year seasonally adjusted fall was 8.5% in September 2016, with a smaller fall in 8.0% in October.
Year on year mortgage approvals fell by 8.0% in August 9.9% in September, which is a strong forward indicator that actual year on year housing transactions numbers, as well as mortgage lending for purchases (although remortgaging is more robust), will continue to fall for the rest of the year.
The total number of housing transactions for the year is likely to be very similar to last year’s 1,229,580, with 14% of the year’s projected transactions taking place in March. After a strong first quarter the number of actual transactions on a year on year basis has been lower in every month this year since April, with the 16.4% fall in October being the biggest of the year.
However, anyone just reading the HMRC comment issued with the figures and not delving into the actual numbers would have no idea of that. Fortunately for HMRC it does not have to meet the FCA’s requirement for brokers and lenders to be “fair, clear and not misleading.”
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