New official forecasts predict that the average UK home will see a significant price increase over the next five years, following Chancellor Rachel Reeves's Autumn Budget announcement.
The Property Price Projection
The Office for Budget Responsibility (OBR) has revealed that the typical British property is expected to rise in value from the current average of £271,531 to just under £305,000 by 2030. This represents an annual growth rate of approximately 2.5% from 2026 onwards, which aligns closely with projected average nominal earnings growth during the same period.
However, this positive price trajectory comes alongside more cautious predictions for other aspects of the housing market. The OBR has revised downwards its expectations for both property transactions and new home construction, indicating potential challenges ahead for market activity.
Government Tax Measures and Market Impact
The more subdued outlook has been partly attributed to new government tax policies designed to increase revenues from the housing sector. Chancellor Rachel unveiled two significant tax changes that are expected to influence market behaviour.
Starting in April 2027, rental income for landlords will face taxation at rates two percentage points higher than standard income tax rates. This increases the basic rate to 22%, the higher rate to 42%, and the additional rate to 47%.
Furthermore, beginning in 2028, a new annual council tax surcharge will apply to homes valued over £2 million. This tax features four bands, starting at £2,500 for properties valued between £2 million and £2.5 million, and rising to £7,500 for homes exceeding £5 million in value.
Expert Warnings and Broader Consequences
Property experts have expressed concerns about the potential ripple effects of these measures throughout the market. Colleen Babcock, a property expert at Rightmove, told the Daily Mail that while the high-value home tax threshold is expected to impact fewer than 1% of properties in England, there could be broader consequences.
"A mansion tax could lead to some distortion at the top end of the market, particularly as the implementation date draws closer," Babcock explained. "While this likely very complex tax aims to target the £2 million and £5 million price sectors, there is an inevitable trickle-down effect for the rest of the market."
She emphasised that a slower market can affect all types of movers, from first-time buyers to key workers and families seeking to upgrade their homes.
These recent tax increases build upon measures announced previously, including a 2% stamp duty surcharge on buy-to-let and second home purchases. This has substantially increased transaction costs for investors and second-home buyers.
For example, the stamp duty bill on a £500,000 second home can now reach around £40,000, compared with approximately £27,500 before the changes. Additionally, council tax premiums on second homes have doubled in many local authorities, meaning a second home owner in England paying the typical Band D council tax of £2,171 is now paying £4,342.
Industry commentators warn that the combination of higher purchase costs, increased taxation on rental income, and forthcoming council tax charges could transform expensive homes from lucrative assets into financial burdens, contributing to the OBR's more cautious forecast on housing market activity.
