House prices in the UK are expected to fall by the end of the year, according to the Office for Budget Responsibility.
The OBR downgraded their official forecasts, predicting that in the final quarter of 2019 average house prices will fall by 0.3%. The independent analysts previously predicted back in October last year that the average price of a home in the UK would grow by 3.2% over that period.
According to official figures, the growth of house prices over 2018 was just 2.5%, the lowest rate in the last 5 years. Many analysts have pointed towards uncertainty surrounding Brexit as a reason for the slowdown in the UK housing market, as well as a shortage of supply. The Royal Institution of Chartered Surveyors said that new buyer enquiries and agreed sales have both been falling for six months in a row.
However, the OBR were more positive about the outlook beyond 2019. They predicted that by the second quarter of next year, average house price growth will hit 0.9%. This is still lower than their previous prediction of 3.1%. But they believe that by the end of 2021, growth will be up to 4% - higher than the 3.3% predicted in October.
“Leading indicators of housing activity and prices have weakened noticeably since our October forecast,” said the OBR. “Beyond the near term, we expect price inflation to pick up as a result of stronger real household income growth and continued pressure of demand on supply. Overall, we expect house prices to rise by almost 17% between the fourth quarter of 2018 and the first quarter of 2024 – close to household income growth over the same period. That compares with forecast growth of nearly 20% in our October forecast.”
However, some people in the housing industry weren’t as confident. Aneisha Beveridge, head of research at estate agents Hamptons International, believes the future of the housing market will be less prosperous if the UK were to crash out of the EU without a deal by the end of the month.
“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,” said Ms Beveridge. “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.”
Simon Rubinsohn, the chief economist at Rics, believes that people selling their home need to be more realistic and have more awareness of the current market conditions.
“This environment requires a greater degree of realism from those looking to move,” said Rubinsohn. “A reluctance from some vendors to acknowledge the shift in the balance of power in the market will compound the difficulty in executing transactions.”
In a bid to tackle the issue of limited supply, the government have announced plans to inject more affordable housing on the market. In his Spring Statement, the chancellor Philipp Hammond guaranteed £3bn of lending to housing associations to help deliver 30,000 affordable homes.