Spring Budget disappoints but OBR revises housing forecasts
There was disappointment with announcements in the Spring Budget, but the OBR has revised its housing forecasts.
The Office for Budget Responsibility (OBR) has almost halved its house price forecasts after another relatively quiet fiscal update for the property market.
Aside from extra funding for housebuilding projects, a clampdown on the furnished holiday lets regime and a cut to the higher rate of capital gains tax on additional property sales, there was little for the housing market to chew on in the Spring Budget.
There was plenty of disappointment though that Chancellor Jeremy Hunt again ignored calls for Stamp Duty reform.
However, OBR forecasts released alongside the red book were perhaps of more interest to agents and property professionals.
The OBR, which keeps an eye on the government’s own finances, said its forecast is for residential property transactions to be broadly flat during 2024.
That is a change from a previously predicted fall of 7% in November.
Property sales will then start to recover, the OBR said, reaching pre-pandemic levels in early 2025, two years before previously expected in November.
The economist said it now expects house prices to fall by 2% instead of 5% during 2024.
It is expecting house prices to grow around 2% in 2026, and around 3.5% in 2027 and 2028. That would see nominal house prices surpass their historical peak in the first quarter of 2027, according to the OBR.
The OBR said this is mainly due to its lower mortgage rate forecast. It now expects mortgage pricing to peak at 4.2% in 2027.
The OBR said:
“There are significant risks to our mortgage rate forecast, demonstrated by the large movements in bank rate expectations since November.
“This also poses a risk to household incomes, residential housing transactions and house prices.”
Meanwhile Paul Smith, who runs the haart estate agency among others, said the Chancellor’s measures to boost the housing market don’t go far enough.
Paul Smith said:
“Personally I think they’ve missed a golden opportunity to promote home ownership, especially for first time buyers, by not going ahead with plans for a 99% mortgage scheme, as had been widely touted.
“They could have also encouraged older people living in larger properties to downsize if they’d gone ahead by giving the stamp duty relief.
“In my view, both are a very big mistake that will cost the Tories dearly.”
Tim Bannister, Rightmove’s property expert, added:
“We had hoped the government would seize the opportunity to help first-time buyers and reform the outdated stamp duty system, instead, home-movers are left with very little.
“There is a chance that the reduction in the higher rate of capital gains tax will mean some landlords to sell properties which could, in turn, increase choice for first-time buyers.
“Whilst any increase in supply for first-time buyers is welcome, we will have to wait to see how substantial it is, and it may also result in a further reduction in already-tight rental stock levels in the short term.”
However, Craig Vile, director of The ValPal Network suggested the announcement of a cut in National Insurance from 10% to 8% could help the property market.
Craig Vile said:
“It will help some first-time buyers overcome lender affordability criteria.
“With inflation coming down and the prospect of lower interest rates to come, we may well see greater confidence in the market and some of that pent up demand begin to flow through.
“Aside from any specific measures to drive transactions, the outlook for the economy is brighter and that should give us all some optimism as we head into the Spring.”
Kindly shared by Estate Agent Today
