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MONEY COMMENT
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Monday saw the launch of yet another house price index, this time by the government (more specifically from the Office of the Deputy Prime Minister, the body responsible for, amongst other things, housing and planning). So now we have eight house price indices to contend with, the others being the Nationwide, Halifax, the Land Registry, RICS, Rightmove, Hometrack and, launched just a few weeks ago, the Financial Times. If you're getting dizzy from the almost daily barrage of reports, then you're not the only one. So which is the 'best' index to look at, and how useful are they when it comes to buying a home? All the indices have their weaknesses, even though most of them claim to be the definitive guide. For example, the Nationwide and Halifax only look at houses for which they provide mortgages, while Rightmove looks at asking prices, which can obviously be rather different than the prices at completion. (For more on how these indices differ, see this Fool's Eye View from last September.) This new index is far from perfect, as it excludes cash purchases. It is also one of the least timely, being based on completion data. But then, as it is an official figure and may become a National Statistic next year if this trial goes well, this is the only viable option. In a rush to be the leading indicator for the housing market, most of the other indices take their data near the start of the home buying process. So although they are timelier, they are likely to be less accurate. The most definitive index remains the quarterly release from the Land Registry, because it contains a complete record of the market. The press release for the new index contained a comment that a Land Registry-based index could become a reality within five years. This would probably be as near to a perfect index as we're likely to get, so let's hope we get it sooner rather than later. As for timing housing decisions, it's debatable whether any of these indices tell you that much. While it's useful to have a feeling for the general trend, obsessing about the detail of monthly price moves and trying to predict what will happen in the next couple of years is largely a waste of time. At the moment, there's no doubt housing is expensive. So house price falls are a distinct possibility and if you're looking to buy a home it's a contingency you need to plan for. The last thing you want is to be stuck with negative equity.