The era of “massive” house price rises in the UK may be about to end, according to a senior economist at the government’s spending watchdog.
David Miles, a member of a key committee at the Office for Budget Responsibility, said one of the main factors that would make runaway house price growth less likely was the increase in working from home.
The rise in the number of people working from home since the outbreak of the Covid pandemic has given many people more options about where they can live.
Miles, who has also served on the Bank of England’s monetary policy committee, added that slower population growth and changes in borrowing costs – namely, the end of the era of record low interest rates – were two other forces that would shape the UK housing market and prices over the coming decades.
“Those forces driving [house prices] up are going to be much weaker, I suspect, in the next 40 years than they have been in the past 40 years,” he said in a speech at the Economic Statistics Centre of Excellence’s conference in London reported by Bloomberg. “If anything, this unusual age of massive rises of house prices may be nearing an end.”
Miles said house prices had risen particularly quickly in the UK compared with other countries because it had suffered from a weaker supply of housing as well as a bigger fall in real interest rates.
The pressure for more houses would ease as the population grew more slowly, added the economist, who is a member of the OBR’s budget responsibility committee, where he takes the lead on economic analysis.
The housing market has recently moved up the agenda for both the main political parties, with the Labour leader, Keir Starmer, saying on Wednesday that he believed property prices should come down to make homes more affordable. He also accused the Conservatives of killing the dream of home ownership, and said his party would be “the builders, not the blockers”.
Meanwhile, it has been widely reported that Rishi Sunak is considering bringing back help to buy – a 2013 Tory policy that only recently ended – to win votes at the next election.
The lender Halifax recently reported that the UK “should expect some further downward pressure on house prices over the course of this year”.
However, there appears to be little agreement among experts about how the property market is currently faring, let alone what may be in store for the future. While Halifax said property prices fell last month after three consecutive months of growth, its rival Nationwide said they rose in April after seven months of declines, suggesting “tentative signs of a recovery”.
The British housing market has often defied those who have predicted a downturn or crash. There were predictions in 2016 that house prices would slump if the UK voted for Brexit, and then a flurry of crash forecasts at the start of the pandemic in early 2020, but in both cases property values carried on going up.
