House prices will rise by 13 per cent over next five years following a bumper 2021, according to Budget forecasts

House prices will rise by 13 per cent over the next five years following a bumper 2021, according to Budget forecasts.

The Office for Budget Responsibility (OBR) said property values were on course to rise by 8.6 per cent this year – significantly faster than previously expected.

And prices are expected to rise every year to the end of its forecast in 2026.

In March, the OBR predicted that prices would fall in 2022 before returning to growth in 2023. But it believes this outlook was too pessimistic following the surge in property values during the coronavirus crisis. The pandemic caused a ‘race for space’ as families looked for bigger homes after months of lockdowns.

Cheap mortgages and built-up savings caused a boom and the stamp duty holiday compressed it into just months, the Government’s spending watchdog said yesterday.

The OBR said the boom pushed house price rises ‘far beyond’ what it would have expected as they hit record highs in June.

It updated a March forecast which said prices would fall 1.7 per cent in 2022, saying instead they will rise by 3.2 per cent.

Figures last week showed house prices rose £25,000 in a year between August 2020 and this year. The average home cost £264,000 in August, the Office for National Statistics (ONS) said, close to the record in June of £265,000. It meant house prices had jumped by more than a tenth in the year, one of the biggest rises recorded.

The ONS said the housing market was returning to normal after a period of heightened activity during the pandemic and the stamp duty holiday.

The tax break removed tax on sales below £500,000 in England, letting sellers bump up prices as buyers’ costs were reduced.

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