New homeowners getting on the property ladder today will not benefit from the same house price boom as previous generations, according to a senior figure at the government’s spending watchdog.
David Miles, a senior economist at the Office for Budget Responsibility (OBR), said the “age of massive rises of house prices may be nearing an end”.
It came as Ben Broadbent, Deputy Governor of the Bank of England, said the generation of buyers who got on the housing ladder in the aftermath of the financial crisis were already worse off than predecessors.
Mr Broadbent told MPs on the Treasury select committee: “Anyone who happened to get into the housing market before the mid-90s are better off than those who bought their first house after 2007.”
Mr Miles said the house price surge seen in recent decades was unlikely to be repeated because of slowing population growth, rising interest rates and an increase in working from home.
Mr Miles said in a speech: “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 is one of three members of the top committee at the OBR, which scrutinises public finances.
Real house prices have risen more than three and a half times since the 1970s, vastly outpacing income growth.
Prices grew particularly rapidly in the decade after the financial crisis as low interest rates fuelled borrowing.
The average home cost £288,000 in February according to the Office for National Statistics, an increase of around 91pc since 2005.
Bank of England Governor Andrew Bailey on Thursday denied that the Bank of England had helped fuel this price surge through quantitative easing (QE), its policy of buying up bonds and assets in the aftermath of the credit crunch in 2008.
Mr Bailey told MPs that “real asset prices have not increased during QE”, arguing that the surge in house prices mostly happened in the decade leading up to 2007.
Appearing alongside Mr Bailey in front of the Treasury Select Committee, Deputy Governor Ben Broadbent insisted there has “not been some great huge boom in asset prices”.
He said “really rapid growth of house prices” occurred between 1997 and 2007, when it averaged 11.5pc a year. Average house price growth over the period of quantitative easing has been 4pc a year.
House prices have risen faster in the UK than in many other similar countries because building has failed to keep pace with population growth, Mr Miles said.
However, with interest rates now rising and birth rates declining, upward pressure on prices is likely to ease in the coming years, he said.
Mr Miles has also previously published research showing that land and house prices decline after a rise in working from home, as people have greater choice over where to live.
His comments came as new figures from the ONS showed that the number of families in the UK has increased by just over a million in the decade to 2022.
Separately, net migration has surged since Brexit and is expected to break new records at well over half a million people in a year when new figures are out next week.
The Conservative government abandoned their target of building 300,000 homes a year in December last year after dozens of backbenchers threatened rebellion.
Labour leader Sir Keir Starmer on Thursday made building more homes a central tenet of Labour’s election programme.
Sir Keir vowed to “back the builders not the blockers” by allowing homes to be built on green belt land and reinstating housing targets.