The Government's official house price index, produced by the Land Registry, has been accused of misleading homebuyers and policymakers after it emerged that it excludes repossessions and auctions on the grounds that they do not reflect the 'full market value' of the sale.

The latest Land Registry figures, published on Friday, showed a 10.1% annual fall in prices across England and Wales, a considerably more benign figure than the indices from Halifax and Nationwide, which reveal prices falling by 15% and 13.9% respectively.

In the past the gap between the figures has been attributed to time-lag differences. But concern is growing that the Land Registry figures, regarded as the 'gold standard' of house price data and used by the Bank of England in setting interest rates, may be fundamentally flawed, as repossessions are ignored.

More than 45,000 repossessions are expected this year - around 6 per cent of all property sales - and several economists have forecast lenders taking the keys back on as many as 100,000 homes in 2009. The previous record was set in 1991 when the number of repossessions topped 75,000.

The Observer