UK Office for Budget Responsibility cuts housing and house price forecasts

The Office for Budget Responsibility (OBR) has lowered its forecasts for the UK housing market, citing economic pressures and regulatory complexities. The watchdog expects 190,000 fewer additional homes to be built over the 2025/26 to 2030/31 period compared to its previous March predictions. Net additions to housing stock are projected to fall from approximately 230,000 in 2025/26 to 220,000 in 2026/27, before a gradual rise to 260,000 by 2030/31.

Several factors are contributing to this downward revision, including higher interest rates, weak demand, and increased costs from building safety regulations and biodiversity net gain requirements. Additionally, the OBR has revised house price growth forecasts downward for 2026 and 2027.

Property transaction volumes are also expected to face pressure, with a projected 4% decline compared to earlier forecasts. This reduction in activity is expected to impact Stamp Duty receipts, which are forecast to be significantly lower than previous estimates. The OBR also noted that potential tax increases on rental income could deter landlords, potentially reducing long-term rental supply and putting upward pressure on rents.