New guidance from the Office for Budget responsibility suggested UK property prices will rise by 3.1 per cent in 2018, plateauing slightly to 3 per cent in 2019 and dropping to 2.9 per cent in 2020.
The Office for Budget Responsibility (OBR) is an advisory non-departmental public body that has been established by the UK Government to provide independent economic forecasts ahead of the Budget. They also predicted that house prices are expected to rise by 15 per cent between the second quarter of 2017 and the first quarter of 2022. This is down from their last forecast of 22 per cent in March. The reasoning behind this was cited as a fall in real incomes.
Forecasts for stamp duty receipts were also revised downward. The levy is forecast to raise £9.6 billion in 2017/2018, rising to £11.7 billion by 2022/2023. Revenue from second homes and buy to let purchases is anticipated to contribute between 23 per cent and 24 per cent of the total annual receipts. Furthermore, it was suggested that stamp duty charge alone will cost the treasury a sizeable £3.2 billion over the next five and a half years.
The most significant impact of this will be felt in London, where first time buyers face higher prices. However, the prime property market in the capital will benefit from the lack of change outlined in the Autumn Budget.
Head of London residential research at Knight Frank, Tom Bill, explained: ‘The Chancellor’s stamp duty cut for first time buyers is good news as he maintained the status quo for the rest of the market. Following more than 25 tax changes in recent years that have affected the prime London residential market, the absence of any further measures will inject a degree of certainty, particularly now there is only one Budget per year.’
He continued: ‘There is anecdotal evidence to suggest that some buyers had been holding off for the Budget in the belief that stamp duty rates may change. Early indications following the Budget suggest such transactions are now likely to proceed as originally planned.’