What is {term}? RICS House Price Balance

The RICS (Royal Institute of Chartered Surveyors) House Price Balance is an indicator of the expected monthly change in house prices in the United Kingdom published by RICS. The RICS house price balance is based on opinions about housing price trends from a sample of surveyors based in the United Kingdom and included in the RICS monthly Housing Market Survey.

BREAKING DOWN RICS House Price Balance

The RICS Housing Price Balance survey released by the Royal Institution of Chartered Surveyors reflects the strength of the U.K. housing market. The housing market is also an important indicator of the nation's overall economy because the housing market is sensitive to the business cycle. A high reading of the house price balance is considered positive (or bullish) for the British pound while a low reading is considered negative (or bearish).

The RICS Housing Price Balance Calculation

The housing price balance figure is calculated as the proportion of surveyors reporting a rise in housing prices minus the proportion reporting a fall in prices. A positive net balance implies that more surveyors are seeing housing price increases than decreases, which would imply a robust housing market. A negative net balance implies that more surveyors are witnessing housing price decreases than increases implying a fragile housing market.

As an example of the housing price balance calculation, assume that in a survey of 300 surveyors, 150 reported that prices went up, 50 reported no change and 100 reported that prices went down. Proportionally, therefore, 50% of surveyors reported higher prices, and 33% reported lower prices giving a net house price balance of +17.

Example of the RICS House Price Balance Report

In February of 2018, the RICS House Price Balance Report issued its findings for January, The house-price balance stood at plus 8 in January, which was unchanged from the previous month. The interpretation of this reading is that an 8-percentage point majority of surveyors reported seeing a house-price increase rather than a decrease.

According to MarketWatch, the balance for January 2018 was above Wall Street analyst estimates, which had predicted that the index would slip to plus 6. The positive index showed that house prices grew in the United Kingdom in January. MarketWatch also stated that The Bank of England had raised borrowing rates in November for the first time in 10 years in an effort to curb accelerating inflation. Bank of England data showed that the number of new mortgages approved by U.K. lenders was close to a three-year low in the final month of 2017.