HOUSE PRICES PREDICTED TO JUMP £20,000 THIS YEAR AS BOOM LASTS ANOTHER 12 MONTHS

The Government’s fiscal watchdog has upgraded its house price forecast to 7.4% growth this year
Properties will be worth £20,000 more by the end of the year as the Government’s official forecaster has predicted the house price boom has another 12 months to go.
High demand and strong household savings mean house prices will climb a further 7.4% in 2022, according to the Office for Budget Responsibility, the Government’s fiscal watchdog.
This means the average home, which was worth £275,000 in December 2021, will cost £295,350 by the end of this year – a rise of £20,350.
The OBR has more than doubled its house price forecasts for this year, as the property boom continues for longer than expected.
The 7.4% prediction in the forecaster’s spring economic and fiscal outlook was an increase of 4.2 percentage points compared to its October report.
Six months ago, it had forecast growth in 2022 of 3.2%. This would have meant a cash increase in 2022 of £8,800. Now, it expects homeowners will make 130% more from their properties than previously suggested.
This forecast is in stark contrast with the consensus from analysts, who expect the market will slow significantly this year. Mortgage lender Halifax has forecast that growth will slow to just 1% in 2022.
Property values have been underpinned by an extreme imbalance between supply and demand. The market boomed after lockdown and the stamp duty holiday introduced in 2020 and demand has remained strong since.
But the boom will stop in 2023 as rising interest rates and falling real incomes bite.
The OBR has forecast that real disposable incomes per person will fall by 2.2% in the coming tax year. This will be the largest drop in a single financial year since records began in 1956-57.
The Bank Rate will also rise to a peak of 1.9% in late 2023. This will increase mortgage costs just as homebuyers have less capacity to save for a deposit.
House price growth will slow dramatically to around 1% by the end of 2023, the OBR said. The average growth rate across next year will be 1.3%.
However, this was still an upgrade from the forecast the OBR made in October, when it expected house price growth in 2023 to average 0.9%.
But the longer-term outlook for the property market has become more sluggish. In 2024 and 2025, the OBR revised its forecasts to 1.5% and 2.5% growth, down from 1.9% and 2.9% respectively.