The UK Office for Budget Responsibility (OBR) has revised its forecasts for residential property price growth downwards for 2026 and 2027. The United Kingdom's independent fiscal watchdog attributed this step to persistently elevated mortgage rates and stagnating wage growth, which noticeably constrain the financial headroom of prospective buyers.
Dampening factors for price trends
The adjustment to the estimates reflects changed market conditions. While earlier models anticipated a more robust recovery, persistently high interest costs are now impacting home ownership affordability for longer. As wage growth fails to keep pace to the hoped-for extent, financial viability is reduced for many buyers, dampening upward pressure on property prices in the coming years.
In addition to the slowdown in price growth, the OBR also expects a noticeable cooling of market activity. According to updated calculations, the number of property transactions is projected to be 4 per cent lower than assumed in earlier forecasts. This decline illustrates the ongoing restraint on both the buyer and seller sides.
Key points of the revision
- —Downward revision of house price growth forecasts for 2026 and 2027
- —Strain on affordability caused by persistently high mortgage rates
- —Dampening impact of stagnating real wage development
- —Decline in expected property transactions of 4 per cent compared with earlier estimates
The combination of restrictive financing conditions and subdued purchasing power means the market will remain in a phase of muted momentum for longer than expected. The watchdog's revised calculations underline the property sector's sensitivity to macroeconomic conditions in the United Kingdom.
