Mortgage lenders' house price figures are flawed, says builder

One of Britain's biggest construction firms yesterday dismissed building society house price indices as "flawed".

The chief executive of Taylor Woodrow, Iain Napier, said the booming house price rises shown by statistics from mortgage lenders were putting heat into the housing market.

Mr Napier said that indices from the Nationwide and Halifax did not take account of the boom in DIY spending that had increased the value of homes, or the disproportionate effect of housing hotspots, and so were not a real reflection of the market.

The House Builders' Federation, a trade association, is developing a house price index of its own to challenge the mortgage lenders' statistics. The housebuilders' figures are likely to show year on year house price increases of be tween 8% and 12% rather than the 20% seen in the Nationwide house price index and the 22% recently seen from the Halifax, which is reporting fresh figures today.

"The statistical basis is flawed," said Mr Napier. "There is no recognition of home improvements put into a home when a customer buys it.

"Most of the new housebuilders are quoting house price inflation at 8% to 12%. If house price inflation is at 20%, where's all the money gone? It is not a realistic perception of what's in the market."

He complained that land is expensive at present due to the perception of house price growth. "With silly inflation prices floated, it is difficult to buy land because they have higher perception of what it's worth," Mr Napier said.

When Nationwide recently issued very strong housing price figures, estate agent group Spicerhaart publicly disagreed with the figures, having seen signs of a slowdown.

But Nationwide economist Alex Bannister said the boom in spending on DIY is taken into account as the indices included the addition of bedrooms and bathrooms. He added that the indices represented only those houses that are changing hands.

"Our houses are low to mid-market," he said. "That part of the market has been seeing faster inflation recently than the upper end of the market."

Halifax economist Martin Ellis said that the builders' figures might not be comparing like with like, and that its own statistics were adjusted to compare houses with similar characteristics.

Mr Napier was speaking as his firm reported a 31% rise in profit before tax to £169m.