UK downgrades residential investment forecast, expected to fall 6.75% by 2030

en.Wedoany.com Reported - On October 28, the UK Office for Budget Responsibility (OBR) published its "October 2026 Economic and Fiscal Outlook," downgrading its forecasts for national residential investment and housing supply. The report projects that UK real residential investment will grow by 0.5% in 2026, a downward revision of 0.2 percentage points from the March forecast; thereafter, average annual growth over the forecast period is expected to be about 3%, roughly 2 percentage points lower than previously forecast, and by 2030 the level of real residential investment is expected to be 6.75% lower than the March forecast.

The adjustment to the residential investment forecast mainly concerns new-build housing activity. The Office for Budget Responsibility expects the UK housing stock to increase by a net ~230,000 homes in the 2025–2026 financial year, falling to ~220,000 in both 2026–2027 and 2027–2028, before gradually recovering to 260,000 by 2030–2031. Compared with the March forecast, the cumulative net addition to housing over the entire forecast period has been revised down by 190,000 homes.

The report notes that actual residential investment performance in the first half of 2026 was weaker than previously expected. Since late 2022, higher interest rates and housing affordability pressures have continued to affect the commercial viability of residential development projects. Rising borrowing costs and weakened buyer confidence have suppressed house price growth, making it more difficult for developers to absorb rising construction costs.

Residential development has also been affected by changes in building safety, environmental and tax regulation. The Office for Budget Responsibility cites factors including the Building Safety Levy, the building safety regulatory regime, biodiversity net gain requirements, nutrient pollution mitigation measures, the Residential Property Developer Tax and adjustments to corporation tax rates. The report concludes that the combination of these policies has increased residential development costs, procedural complexity and implementation timelines, with impacts on housing construction activity exceeding the assumptions in previous forecasts.

The Office for Budget Responsibility maintains its assessment that the 2024 planning reforms will boost housing construction, but the latest planning permission data indicate that short-term housing supply is significantly weaker than the level required by previous forecasts. The expected decline in new-build residential investment is partially offset by investment in improvements and renovations of existing homes.

House price and property transaction forecasts have also been adjusted accordingly. The Office for Budget Responsibility expects UK average house prices to rise by about 2% in 2026, 2.5% in 2027, and about 2.75% per year from 2028 onward. Property transaction volumes are expected to increase from about 1.2 million in 2026 to about 1.3 million by 2031, but total transactions over the entire forecast period are about 4% lower than the March forecast.