OBR expects 7.6% ‘peak to trough’ house price dip

The average house price will dip with a 7.6% ‘peak to trough’ by the end of 2024, the Office for Budget Responsibility (OBR) has claimed in its latest economic forecasts.

The OBR, which keeps an eye on the government’s own finances and forecasts, has released its own economic outlook following Chancellor Jeremy Hunt’s Autumn Statement yesterday.

While anticipating a drop in prices, the OBR now believes the decline won’t be as steep as previously forecast.

Its central forecast estimates that house prices will grow by 0.9% in 2023 and then fall by 4.7% in 2024. 

The OBR said:

“This would be consistent with the price of the average UK home reaching a low of around £266,000 at its trough in the final quarter of 2024. 

“All in all, from their high in the fourth quarter of 2022 to their low in the final quarter of 2024 nominal house prices are expected to decline by 7.6 %, 2.4 percentage points less than we expected in March.

“We then expect house prices to recover slowly, reaching their late 2022 peak levels in the second half of 2027 and rising to 6.4% above this level by the end of the forecast.

“The outlook for house prices is particularly sensitive to changes in interest rates and household income growth.”

In March, the OBR had predicted house prices would be down 1.1% this year and 5.7% in 2024, before average values rise by 1.1% in 2025, 3.4% in 2026 and 3.6% in 2027.  

However, the OBR also estimates that average interest rates on the stock of mortgages are expected to rise from a low of 2% in 2021 to a peak of 5% in 2027. This is 0.8 percentage points above its March forecast and 2.2 percentage points above the average of the previous decade.

It expects housing transactions to fall by 6.9% in 2024, a 1.9 percentage point steeper decline than in March’s forecast of 5%. The OBR then expects housing transactions to steadily return to growth from the final quarter of 2024, returning to pre-pandemic levels in the first quarter of 2027.


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