House prices will fall by 10% from their peak at the end of last year, the government predicts.
Poor consumer confidence, shrinking real incomes, and anticipation of rising mortgage rates will all lead to a fall, according to the Office of Budgetary Responsibility (OBR).
But prices will start to rise again in 2026, OBR experts predict, as Chancellor Jeremy Hunt released his spring budget in which he said the UK would avoid a recession.
The forecast for a 10 percent drop is 1 percentage point more than forecast after the November financial report and will be bad news for homeowners looking to sell, but good news for first-time buyers.
The OBR also said real estate transactions are expected to fall 20% from their high at the end of last year as the market slows.
Last year, the Bank of England base rate hike and the September mini-budget pushed mortgage rates up to around 6% for millions of borrowers.
Although they later eased slightly, the higher cost of credit has deterred many potential buyers in recent months, leading to a rapid growth in the rental market and rising average rents, making it more expensive for both buyers and renters to find a home.
According to analysts, the cost of mortgage loans is likely to rise even more because the Bank of England “screwed up” with inflation.
The bank has now raised its base rate for 10 consecutive meetings, and interest rates are now at their highest level since 2008, putting more pressure on mortgage holders.
But in response to higher borrowing costs, home prices, which had been rising for two years, began to fall last fall and fell 1.1% a year through February.
Median home prices fell to £257,400 in February from a peak of £273,800 in August, according to data from the National Building Society.
Previous data from Halifax and Nationwide suggested that prices fell 6% between their peak in the middle of last year and last month.
The latest survey by the Royal Institute of Certified Surveyors has painted a bleak picture of the market for sellers, with sales “presumably set to continue to fall over the next three months” and up to seven out of 10 properties are selling below asking price.
In its projections, released with the budget, the Office of Budget Responsibility also predicts the biggest drop in living standards on record.
It says the rising cost of living means real household disposable income per person is projected to fall by 3.7% in 2022-2023 and by 2% in the next fiscal year.
In his spring budget, the chancellor said a recession could be avoided and inflation would fall from 10.7% to 2.9% by the end of this year as the economy “proves the doubters wrong.”
Credit: www.independent.co.uk /