UK house prices are on track to edge higher over the whole of 2024, a sign that the housing market is remaining resilient. But what will happen next year and beyond?
The Office for Budget Responsibility (OBR) released its latest predictions this week for both house prices and future mortgage rates moving forward and it showed an uptick compared to its March predictions.
The OBR’s central forecast is that house price growth will fall back marginally from 1.7% in 2024 to 1.1% in 2025, as the average effective mortgage rate continues to rise.
House price growth then averages around 2.5% from 2026 until the end of the forecast [2030] supported by nominal earnings growth.
The OBR said in a statement: “House prices have risen by around 3% in the first half of the year, such that the average house price was around 3 per cent higher than our March forecast in mid-2024.
“Average house prices remain above our March forecast throughout, driven by the recent resilience and our forecast for higher nominal incomes.
“This would leave the average house price in the UK at £310,000 in 2028, around 2.5% higher than our March forecast.”
As far as property transactions are concerned, the OBS forecasts that they will rise from around 275,000 a quarter in 2024 to about 350,000 a quarter over its five-year forecast period.
It added: “We expect housing starts, a leading indicator of net additions to the housing stock, to gradually pick up from a decade-low of around 100,000 in 2024 to reach around 160,000 in 2029.”
Cumulatively over the forecast, net additions are around 1.3 million. But the OBR accepts that the government’s proposed changes to the National Planning Policy Framework as part of wider reforms to the planning system could increase these numbers if the measures prove successful.
