OBR forecasts house prices will rise by 3.1% next year
House prices in the UK will rise by 3.1% in 2018, slow slightly to 3% in 2019 and then 2.9% in 2020, with the higher rate next year down to stamp duty change, according to new guidance.
The figures were published by the Office for Budget Responsibility (OBR), an advisory non-departmental public body established by the UK Government to provide independent economic forecasts and independent analysis of the public finances ahead of the Budget.
They often get buried among all the other Budget news but along with an advisory note from HMRC also published to accompany the Budget announcements, the data indicates that prices are going to rise due to the abolition of stamp duty for first time buyers.
The OBR also says that house prices are expected to rise by 15% between the second quarter of 2017 and the first quarter of 2022, less than its last forecast of 22% in March. The OBR cites a fall in expected growth in real incomes as a reason for the longer term slowdown.
Unsurprisingly the OBR has also revised its forecasts for Stamp Duty receipts downward. It is forecast to raise £9.6 billion in 2017/2018, rising to £11.7 billion by 2022/2023. Revenue from second homes and buy to let purchases is expected to contribute between 23% and 24% of the total annual receipts in any given year. It has also estimated that the stamp duty change alone will cost the treasury £3.2 billion over the next five and a half years.
The biggest impact of the stamp duty change could come in London where first time buyers face much higher prices while at the other end of the market the sale of more expensive homes have been hit by several factors, including higher stamp duty bands introduced in 2014.