Real Estate

UK house price forecasts are drastically downgraded


The UK fiscal watchdog has drastically downgraded its house price forecasts, saying average home prices will fall this year. 

Prices will drop 0.3 per cent in 2019, the Office for Budget Responsibility forecast on Wednesday, in what it said was a “much weaker” outlook than before. In October it had projected 3.2 per cent growth for the year. 

“Leading indicators of housing activity and prices have weakened noticeably since our October forecast,” the independent body said. 

The OBR still expects prices to grow in 2020, but now foresees 2.6 per cent growth, down from the 3.1 per cent forecast it had made five months ago. 

Aneisha Beveridge, head of research at the estate agency Hamptons International, noted that “their forecasts are based on the assumption that the UK will leave the EU on March 29 with a deal in place and a smooth transition period”. 

“But given that this assumption is now looking less likely than ever, there is every possibility that their forecast for house price growth will be revised down again,” Ms Beveridge added. 

The fresh projection follows a housing market slowdown in the lead-up to the planned Brexit date of March 29. Annual house price growth in 2018 was 2.5 per cent, according to official data, the slowest rate in five years. 

The OBR added: “Beyond the near term, we expect house price inflation to pick up as a result of stronger real household income growth and continued pressure of demand on supply.” It forecast growth of 4 per cent in 2021, above the 3.3 per cent it predicted in October. 

Housing transactions will drop 1.8 per cent in 2019 from a year earlier, the OBR projected. 

As a result of the weaker forecasts, the OBR said the public purse would receive £500m less a year on average than previously projected from property transaction taxes, beginning in 2019/20 — largely thanks to lower residential stamp duty receipts. 

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That means it is set to receive £12.6bn from property transaction taxes in 2019-20, down from a £12.8bn figure now expected in 2018-19. 

The government meanwhile said it would guarantee up to £3bn of borrowing by housing associations to help build some 30,000 new homes — but this figure forms part of £8bn of guarantees already announced in 2017. 

The National Housing Federation, which represents housing associations, welcomed the announcement but said: “Whilst this is an important contribution, we desperately need new money in the next spending review to build more social housing. This is more crucial than ever in the midst of Brexit uncertainty.” 

Similarly, Philip Hammond, the chancellor, said £717m of cash from the existing £5.5bn Housing Infrastructure Fund would be allocated to sites including Old Oak Common in London, the Oxford-Cambridge Arc and Cheshire, aiming to “unlock” about 37,000 new homes.



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