According to the government’s official forecaster, UK property prices will decline for the next two years before beginning to increase again.

Between now and autumn 2024, the Office of Budget Responsibility (OBR) anticipates a decline of 9 percent.

Following a period of strong increases in house prices, this will be a comfort for some first-time purchasers.

However, a strain on their finances will hinder their ability to save for a down payment.

In addition, the cost of a mortgage is likely to remain significantly higher than what homeowners have become accustomed to over the past decade. A typical two- or five-year fixed-rate loan has an interest rate just above 6% at present.

Home loan burden

According to the Office for Budget Responsibility (OBR), higher mortgage rates and the broader effects of a slowing economy, such as growing unemployment, would combine to reduce home prices.

Despite the current slowdown, it is anticipated that property values will climb by an average of 10.7% this year.

This will be followed by two years of declining home values, with prices decreasing by 1.2% in 2020 and 5.7% in 2024.

Then, according to the OBR, property prices will begin to rise at a rate slightly faster than incomes, increasing by 1.2% in 2025, 3.0% in 2026, and 3.5% in 2027.

As a result of the sensitivity of home prices to mortgage rates and general borrowing costs, “significant uncertainty” surrounded this forecast, the report stated.

In reality, the housing market in the United Kingdom is a collection of local markets, so house price declines may have a greater impact in some regions than others.

Despite the recovery following the 2008 financial crisis, house prices in the northeast of England did not return to pre-crash levels until the end of 2020. In the meantime, housing prices in Northern Ireland remain below their pre-crisis peak.

Even if home prices decline, first-time buyers with constrained incomes may still need assistance from parents and grandparents to save enough for a deposit.

Richard Fearon, chief executive officer of Leeds Building Society, stated, “Our research indicates that 81% of aspiring first-time buyers say the cost of living crisis has made it more difficult for them to save for a deposit, and nearly half of them now doubt they will ever climb the housing ladder.”

He stated that the market’s primary long-term issue was still a lack of housing.

The reductions in stamp duty will be reversed by a new deadline at the end of March 2025. This may also affect the long-term plans of prospective buyers in London and the southeast of England, where stamp duty is paid in the vast majority of cases.

Other measures announced in the Autumn Statement may have a significant impact on other sectors of the housing industry.

Tenants renting social housing in England will continue to pay higher rent, but not as much as had been anticipated.

Jeremy Hunt, the Chancellor of the Exchequer, announced that the government would limit the increase in social rents in England to a maximum of 7% in 2023-24, as opposed to the 11% increase that was possible under the previous rules. This cap does not apply to rents for shared ownership or the private sector.

Buy-to-let landlords, who may include accidental landlords who find themselves with two homes after moving in together, face a higher capital gains tax bill if they decide to sell.

The annual exemption before paying capital gains tax will decrease from £12,300 to £6,000 in April and then to £3,000 the following year. When you sell an asset, such as company shares, a second home, or a buy-to-let property, the tax is due.