UK house prices are forecast to fall by 10% from the fourth quarter high in 2022, data from the Office of Budgetary Responsibility (OBR) reveals.
This represents a one percentage point larger fall than the OBR’s November forecast.
Meanwhile, data found that property transactions are expected to drop by 20% relative to their peak in the same quarter.
Leading indicators from Halifax and Nationwide suggest that house prices have already fallen by 3% to 6% between their peak in the middle of 2022 and February 2023.
The main contributors to the falls in house prices and reduction in housing market activity include low consumer confidence, the squeeze on real incomes, and the expectation of mortgage rate rises to come.
Yesterday, chancellor Jeremy Hunt announced the OBR had said the UK would “not enter a technical recession this year”.
In his Spring Budget speech, Hunt said hanging international factors, along with the steps the government has taken, have worked to prevent a recession.
The OBR has forecast a fall in inflation from 10.7% in Q4 2022 to 2.9% by end of 2023.
“We are following the plan and the plan is working,” said Hunt.
The prime minister’s overall aim is to return inflation to the Bank of England’s 2% target.
Following the budget announcement, the property industry argued it had been given the “cold shoulder” by the chancellor.
Forecasters said the government had around £30bn extra to spend due to lower energy costs than previously expected last year.
However, the Chancellor choose to spend the cash available to him on such areas as extending the energy price cap, allowing larger pension pots for higher earners and expanding free childcare.
Labour leader Keir Starmer said in his Budget response that “there was no real ambition on housebuilding”.
Property professionals expected the Budget to be constrained, but had hoped to see some action on such issues as looser planning rules, green homes, stamp duty reform, or landlord tax exemptions.
But there was little in these areas, with the sector greeting the statement with a mixture of disappointment and resignation.
