Housing costs measured by the ONS cover the money spent on services associated with owning, maintaining and living with an owner’s own home. It noted this is distinct from the cost of actually purchasing the property in the first place.
The ONS is currently using three separate measurements for these costs, and “evaluating the performance of the different measures over time”.
The ‘rental equivalence’ approach uses the rent paid for an equivalent house as an estimate of the cost of housing services that are consumed.
As the ONS explains it: “We value housing services by looking at the cost of the next best alternative to home ownership, namely renting a property.”
Repairs and maintenance hikes
According to this measurement, housing costs for owner occupiers have grown by 1.1 per cent over the last 12 months.
The ‘net acquisitions’ approach has consistently been larger than the other two measurements dating back to 2009, and according to the ONS has grown by 1.5 per cent over the last year.
This measurement includes a host of factors, such as major repairs and maintenance, insurance policy costs, and services related to ownership of the property.
However, the ONS warned that due to a “lack of available source data” it was not the ONS’s favoured measurement when tracking inflation.
Payments up 2.5 per cent
Finally, there is the payments approach, which looks to track all payments households make as owner occupiers, from mortgage interest payments to ground rent and running costs to insurance.
This measurement saw the sharpest annual rise at 2.5 per cent, with mortgage interest payments the biggest contributor to that rise.
The ONS said this measurement is not its preferred option for tracking inflation, as interest payments represent the cost of borrowing money rather than the cost of consumption.
However, it is the favoured method for household cost indices, when consumption is not such an important factor.