The Office for Budget Responsibility - part of the Treasury but operating independently of government - is forecasting house prices to grow by 0.9 per cent this year and then fall by 4.7 per cent in 2024.
In paperwork released as part of Chancellor Jeremy Hunt’s Autumn Statement it says: “This would be consistent with the price of the average UK home reaching a low of around £266,000 at its trough in the final quarter of 2024.”
From their high in the fourth quarter of 2022 to their low in the final quarter of 2024, nominal house prices are expected to fall by 7.6 per cent - some 2.4 per cent less than forecast in March.
“We then expect house prices to recover slowly, reaching their late 2022 peak levels in the second half of 2027 and rising to 6.4 per cent above this level by the end of the forecast. The outlook for house prices is particularly sensitive to changes in interest rates and household income growth.”
The OBR says headline inflation will fall to 2.8 per cent by the end of 2024, before reaching the official 2.0 per cent target in 2025 - that’s a significantly slower fall than the Office predicted early this year.
Meanwhile the OBR has also downgraded growth forecasts: it says the UK economy is set to grow by 0.6 per cent in 2023, which then expects growth of 0.7 per cent next year against 1.8 per cent forecast in March.
It says: “We expect growth to remain subdued at 0.7 per cent in 2024 as a result of weak real wage growth, the effect of past increases in interest rates and fading fiscal support weighing on economic activity.”
Finally the OBR's latest forecast for average earnings growth is higher for this year and next year than it predicted back in March at the time of the Budget.
It expects average earnings growth of 6.8 per cent by the end of 2023, which is 1.9 per cent higher than its March forecast. It says: “We expect earnings growth to ease back to 3.7 per cent in 2024 and 2.2 per cent in 2025 as inflation falls further, labour market conditions continue to loosen and unemployment rises.”
Earnings growth is expected to be around 2.8 per cent in 2028.