The Office for Budget Responsibility expects house prices to fall 3.8 per cent in 2021 in a moderate ‘central’ economic scenario, it says in its latest fiscal sustainability report.
The OBR then sees growth of 9.6 per cent occurring in 2022.
The above forecast is one of three provided by the OBR, with the two others being an upside scenario, in which economic activity rebounds fast, with economic activity back to where it was at its pre-Covid-19 peak in Q1 2021, and a downside scenario, in which activity takes until Q3 of 2024 to recover.
In the central scenario the OBR sees it taking until Q4 2022 for the economy to get back to how it was at the start of this year.
In the downside forecast, the OBR says that house prices may fall 2.4 per cent this year, fall by a further 11.7 per cent in 2021, and then regain 10.4 per cent in 2022.
In the upside forecast, house prices may gain 0.2 per cent this year, 4.1 per cent in 2021, and then shoot up by 12.2 per cent in 2022.
On the recently announced Stamp Duty holiday, the OBR believes that one consequence will be the number of property transactions in 2020 to 2021 increasing by 100,000, with a quarter of those being “truly additional”.
The remaining number will have been brought forward from 2021 to 2022, it adds.
It also says that the holiday will push house prices up by “around” 0.5 per cent.
Overall, the Stamp Duty holiday is expected to cost the Treasury £2.5bn.
SOURCE: https://www.mortgagestrategy.co.uk/news/obr-predicts-house-price-fall-in-2021