Housing market to pick-up in 2013, says OBR

Key in a door The housing market has seen little activity recently amid tough economic conditions

Housing market activity will surge in 2013 after a stagnant few years, according to forecasts from the Office for Budget Responsibility (OBR).

It said there would be a 20% rise in transactions in 2013-14, compared with the previous year.

The OBR also predicted that house prices would rise at levels above inflation from the same year, reaching annual growth of 4.5% in 2015-16.

The forecasts accompanied the chancellor's Autumn Statement.

Subdued

Sales have been at comparatively low levels during the period of economic turmoil, owing in part to lenders' caution when handing out mortgages, buyers' worries about their jobs, and sellers' unwillingness to reduce asking prices.

The latest figures from HM Revenue & Customs showed that 76,000 homes were sold in October, which was 1,000 more than in September, but still 3,000 fewer than in October last year.

It means that sales for the year so far have been 5% down on 2010.

Autumn Statement documents

PDF download Autumn Statement 2011[3MB]

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The sluggish market was also in evidence in figures from the Bank of England, which showed that mortgage debt was reduced by £9.1bn in the second quarter of the year.

Housing equity withdrawal has been negative in every quarter since the spring of 2008, the Bank of England said, which was a direct result of very few transactions taking place.

However, the OBR - the independent, but government-funded, economic forecaster - said that this would change in a few years.

It predicted that transactions would fall by 3% in 2011-12, grow by 1.5% the following year, but then surge by 20.7% in 2013-14.

Meanwhile, house prices will fall by 0.9% in 2011-12, dip by 0.1% the following year, then rise by 2.7% in 2013-14, and increase by more than 4% in each of the next three years.

A week ago, the Centre for Economics and Business Research said the average UK home would increase in value by 3.2% in 2015. Earlier this year it had predicted that prices would go up by 4% in 2015.

OBR predictions (change on previous year)

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

Property transactions

-3%

1.5%

20.7%

15.6%

7.4%

6.2%

House prices

-0.9%

-0.1%

2.7%

4.4%

4.5%

4.5%

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