House prices to fall by 9pc over next two years, says watchdog
HOUSE PRICES will fall by 9 per cent as high mortgage rates hammer buyers and trigger a two-year housing downturn, the Government’s fiscal watchdog has warned.
Just as house prices are starting to recover in 2025, buyers will be hit by higher taxes, as Chancellor Jeremy Hunt announced he would reverse Kwasi Kwarteng’s stamp duty cut in three years’ time.
The average UK home will lose £23,580 in value over the next two years as Britain buckles under a recession and high borrowing costs take their toll, according to a forecast by the Office for Budget Responsibility.
In England, a typical £314,000 property will lose £28,260 in value as demand slumps.
Average rates across all outstanding mortgage loans – meaning those held by existing homeowners as well as new buyers – will surge to 5 per cent by the second half of 2024.
This will be the highest rate recorded since 2008 as inflation keeps interest rates higher for longer than previously expected. In March, the OBR forecast this rate would peak at 3.2 per cent.
High rates mean buyers will not be able to borrow as much and will have to cut their budgets, just as existing homeowners become more likely to default on their payments.
Plunging demand means transactions will fall by 15 per cent year-on-year in 2023 – a loss of nearly 200,000 sales, according to the OBR’S forecast. This will be a drop of 11 per cent compared with the 2019, pre-pandemic benchmark.
In his Autumn Statement yesterday, Mr Hunt said: “The OBR expects housing activity to slow over the next two years, so the stamp duty cuts announced in the mini-budget will remain in place but only until 31st March 2025.”
Back in September, then-chancellor Mr Kwarteng raised the nil-rate stamp duty band from £125,000 to £250,000, and raised the tax-free first-time buyer threshold from £300,000 to £425,000, bringing the thresholds largely in line with house price growth.