The era of huge UK house price rises is ending, economist says

THE age of huge UK property price increases may be coming to an end as population growth slows and working from home booms, according to a senior economist at the Office for Budget Responsibility.

David Miles, one of three members of the UK budget watchdog’s top committee, said that changing working habits, a flattening population and an end to a decades-long fall in borrowing costs make explosive house price growth less likely.

“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,” he said in a speech at an Economic Statistics Centre of Excellence conference in London. “If anything, this unusual age of massive rises of house prices may be nearing an end.”

Miles, who was also on the Bank of England’s Monetary Policy Committee, said the UK has suffered particularly rapid house-price growth compared with other countries because it suffered from a weaker supply of housing as well as a bigger fall in real interest rates.

The lack of housing has become a politically contentious issue since the government dropped plans for mandatory construction targets to fend off a rebellion by backbench Conservative members of Parliament last year. The government is already falling far short of its pledge to build 300,000 new homes each year.

Prime Minister Rishi Sunak is facing new calls to promote homebuilding, after the UK’s housing crunch was blamed for contributing to the Tories’ widespread losses in local elections earlier this month when it lost more than 1,000 council seats. Following the votes, Labour – which backs targets – became the largest party in local government.

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On Wednesday (May 17), opposition leader Keir Starmer said the Labour Party – which holds a double-digit lead over the Tories in opinion polls – would reform the planning system and change rules to accelerate housebuilding if it wins the next general election.

For his part, Miles said the pressure for more houses will ease as the population grows more slowly.

The problem of building enough houses has “clearly been rather acute over the last 40 years because the population of the UK has gone up a great deal”, he added.