Property prices will likely rise much slower than in past years due to slowing population growth and a rise in interest rates.
The “age of massive rises of house prices may be nearing an end”, as the forces driving them have become much weaker in the past 40 years, according to David Miles, a senior economist at the Office for Budget Responsibility (OBR).
He said Britons buying property in coming years are unlikely to see the same extensive uplift in house prices that past generations have benefitted from.
Slowing population growth, rising interest rates and an increase in working from home will likely mean that property prices will rise more slowly, according to Mr Miles.
This is because people have greater choice over where to live as there is no need to be close to work, meaning they can opt for cheaper houses than before.
Mr Miles said: “If anything, this unusual age of massive rises of house prices may be nearing an end.
“Those forces driving them up are going to be much weaker, I suspect, in the next 40 years than they have been in the past 40 years.”
The comments suggest that people who buy homes today will unlikely be able to use their properties to help fund their retirements in the way previous generations have been able to.
Mr Miles explained that as interest rates now rise and birth rates fall, prices will rise at a much more gradual pace in the coming years.
Those who purchase homes today might not be able to use their properties to help fund their retirements in the way previous generations have been able to.
House prices have risen much faster than income growth since the low-interest rates after the financial crisis fuelled borrowing
The average home cost £288,000 in February according to the Office for National Statistics, an increase of around 91 percent since 2005.
House prices have risen faster in the UK than in many other similar countries because it has failed to keep pace with population growth, Mr Miles said.
Labour leader Sir Keir Starmer made a pledge for building more homes to help get more people onto the property ladder.
Sir Keir told the British Chambers of Commerce annual conference: “Relative to income, I’d like to see [house prices] come down, but the sheer number [of properties] has to go up.
“You will have all seen the statistics about how old people on average now need to be to make sure they’re able to own their own home.
“It’s shocking – it’s shocking because the basic core security of having your own home matters hugely.”
