Is this the definitive relativity curve?
We wish it were, but as more data is added the relativity may change. However, even though it is still
a work in progress, it is based on market evidence of around 8,000 flat and house sales from 1987-
1992 i.e. the 'no-Act world'. For this reason and the fact our relativity is a robust quantitative analysis,
it is superior to the existing opinion based relativity, the majority of which have been compiled by
surveyors who act for the Estates.
Has relativity changed since 1987-1992?
Relativity may have changed and it may have gone up, as London has become wealthier, or it
may have diminished, due to changes in life expectancy or a change in the economic environment.
However, as the world has been tainted since 1993 by the Act and the existing opinion based
relativities, to the no-Act relativity is impossible to quantify with current sales. The existing relativity
curves are also based on historic data.
Why do you use hedonic regressions?
This is a standard statistical technique used by statistical institutes and central banks around the world.
It has become common place in the property market and is now used by banks in their automated
valuation models.
Why has no one else done this?
We would welcome others following our example. It is interesting to note the Estates and their
surveyors have a wealth of historic data, as well as the research capability, but have not yet published
anything of this sort.
Why do you charge?
The work started in 2011 and it has taken almost three years. More data has been offered and this may
improve the model further, but will require more research time, which needs to be compensated.
Is there just one curve?
We work from three relativity models, which have different constraints (one just uses ‘verified’ sales)
and they all produce very similar results, which shows the analysis is robust.
The curve is flat at a higher relativity?
In actual fact the 'average relativity' is steeper earlier on and then becomes asymptotic i.e. it continues
to increase albeit at a decreasing rate.
Is this a 'leaseholders' curve'?
No - it is an objective mathematical analysis. The average relativity does become freeholder friendly
at around 70 years.
Is it geographically limited, as you use just sales from London?
Relativity is a ratio and what is common to the numerator and denominator cancels out. Therefore,
location should have no effect and this evidence based relativity should be applicable throughout the
country.
Has the analysis been checked by third parties?
The statistical procedure and the computer code have been reviewed by several academics who have
replicated the results and checked the underlying data (one of which was Professor Sean Holly,
Director of Economic Research at the University of Cambridge).
