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Government economists think UK house prices could start falling at the end of this year

A estate agent’s board is seen outside a property on October 8, 2014 in Bristol, England. Photo: Matt Cardy/Getty Images
A estate agent’s board is seen outside a property on October 8, 2014 in Bristol, England. Photo: Matt Cardy/Getty Images

Government economists expect UK house prices could fall briefly at the end of this year and the start of 2020.

The Office for Budget for Responsibility (OBR) said on Wednesday: “We expect annual house price inflation to fall to just below zero towards the end of 2019.”

The OBR said that “leading indicators of housing activity and prices have weakened noticeably since our October forecast,” leading to the much weaker outlook for house prices in 2019 and 2020.”

The OBR is a non-departmental arm of government set up by former chancellor George Osborne in 2010 to provide forecasts independently of central government.

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The house price forecasts came in a 205-page report produced by the OBR and published alongside chancellor Philip Hammond’s spring statement on Wednesday. The OBR did not give any theory as to why conditions in the property market had deteriorated since October 2018 when it last made forecasts.

The OBR’s forecast for house price growth in the UK. Photo: OBR
The OBR’s forecast for house price growth in the UK. Photo: OBR

As well as a fall in house prices, the OBR expects transactions to fall by 5.4% between the end of 2018 and the middle of this year.

“Transactions have picked up over 2018 after a decline the year before,” the report said. “But the latest near-term indicators of housing market activity point to a significant weakening.”

While prices and transactions are forecast to decline, the OBR thinks the UK housing market will remain solid over the long-term.

“Beyond the near term, we expect house price inflation to pick up as a result of stronger real household income growth and continued pressure of demand on supply,” the OBR said.

“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.”