The House Price Index (HPI) is calculated by taking freehold open market sales and applying the following methodology:
- The sum of all sale prices are taken and divided by the sum of all current capital values of these properties to calculate a price to value (p/v) ratio.
- The p/v ratio is applied to the total capital values of all properties within a Territorial Authority (TA) to calculate an estimated current total valuation for all properties within that TA.
- The estimated current total valuation is divided by the number of properties within the TA to calculate an average current valuation for that TA.
- The current average value is compared to the current average value at December 2003 to create a current index value.