Britain might never see the house price gains over the past four decades ever again, the government’s official spending watchdog suggested today.
“The age of massive rises of house prices may be nearing an end", said David Miles, senior economist at the Office for Budget Responsibility.
Citing working from home and a slowdown in population growth, Miles said forces driving house prices will be much weaker in future.
House prices have risen by around 91% since 2005, due, he said, to limited supply and a sharp fall in the real cost of narrowing.
Bank denies fuelling house price surge
Speaking to the Treasury Select Committee later, the Bank of England denied it was responsible for fuelling the surge in house prices following the 2008 financial crash through its loose monetary policy or QE.
Andrew Bailey, the Bank’s governor, told MPs: "Real asset prices have not increased during QE", he said, instead pointing to the ten years prior to 2007 that he said had helped create a "greater degree of inter-generational inequality".
Ben Broadbent, deputy governor, added that the "really rapid growth of house prices" occurred between 1997 and 2007, an average of 11.5% a year and that the average over the period of quantitative easing has been 4% a year.
"What is true is there has been a rise in intergenerational inequality which occurred between 1995 and 2005.
"Anyone who happened to get into the housing market before the mid-90s is better off than those who bought their first house after 2007.
"The real value of UK equity prices today is where it was in 2005."
According to the Office for National Statistics, an average UK house price costs £288,000 currently compared to £61,000 in February 1997 and £177,000 in 2007.