OBR House Price Forecast 2026 2027 Transactions Stamp Duty: What the October 2026 Budget Means for London

Mortgage approvals fell to 53,400 in September, the lowest since December 2023, according to Bank of England data released on 29 October 2026. A day earlier, the Office for Budget Responsibility quietly rewrote the story of Britain's housing market for the next five years. The OBR house price forecast 2026 2027 transactions stamp duty figures published alongside Budget 2026 point to slower growth, fewer sales and lower tax receipts than expected just seven months ago.

For London buyers and sellers, this is not a crash story. It is a story about a market that is cooling, not collapsing, and that changes how people should think about negotiating, pricing and timing a move.

What the OBR Actually Forecast

The OBR's Economic and Fiscal Outlook, published with the Autumn Budget on 28 October 2026, trimmed its house price projections. As reported by The Negotiator (Marc Shoffman, 29 October 2026), the OBR now expects:

• Average UK house price growth of about 2.1% in 2026, down 0.3 percentage points from its March forecast
• Growth of about 2.5% in 2027, down 0.5 percentage points from March
• Property transactions rising from roughly 1.2 million in 2026 to 1.3 million in 2031, but running about 4% lower across the forecast period than previously expected
• Stamp duty land tax receipts of £17 billion in 2026-27, a 0.6% fall on 2025-26 and about £3.2 billion below the March forecast

The OBR pinned the downgrade on higher mortgage rates and flat real wages, warning that "the outlook for house prices remains highly sensitive to the path of mortgage rates, the evolution in real incomes."

Key Takeaways

• The OBR has cut its house price growth forecasts to 2.1% for 2026 and 2.5% for 2027, both lower than its March 2026 projections
• Transactions are forecast to stay about 4% below previous expectations as higher mortgage rates weigh on activity
• Stamp duty receipts are forecast at £17bn for 2026-27, roughly £3.2bn lower than March's estimate
• Mortgage payments are expected to reach their highest share of household income since 2009, with average effective mortgage rates near 5% by 2031
• A softer, slower market gives buyers more room for due diligence and gives sellers less margin for pricing mistakes

Why Mortgage Rates Are Doing the Damage

The OBR's commentary is consistent: higher borrowing costs, not weak demand, are the main drag on both prices and transaction volumes. The OBR separately projects that mortgage payments will reach their highest share of household income since 2009, with the average effective rate on outstanding mortgages climbing to around 5% by 2031.

That matters for London specifically. Higher average loan sizes mean London borrowers feel rate rises more acutely in cash terms than elsewhere in the UK, even if percentage price growth looks similar nationally.

Stamp Duty: Lower Receipts, Not Lower Rates

The forecast fall in stamp duty receipts, to £17bn in 2026-27, about £3.9bn a year lower on average over the rest of the forecast, is largely explained by the OBR as "largely due to the lower-than-expected in-year receipts," reflecting fewer transactions rather than any announced change to stamp duty rates themselves.

For buyers, this is a signal, not a discount. Fewer transactions mean less competitive pressure at exchange, but stamp duty liabilities on individual purchases are unaffected by this macro trend.

The Your First Home Scheme and Rental Supply Warning

The OBR noted that the Your First Home scheme may add slightly to prices by boosting demand, though it expects the effect to be small. More significant, longer term, is its warning on rental supply: higher income tax on rental income could push rents up over time because "potential landlords are less likely to enter the market, reducing long-run rental supply." Londoners renting while they save for a deposit should factor this into their timeline, rental cost pressure may offset some of the benefit of a slower sales market.

What a 4% Lower Transaction Market Means in Practice

A smaller pool of transactions usually means longer chains take more care, fewer rival bidders per property, and more room for buyers to insist on proper surveys before committing.

What This Means for London Buyers

A slower market removes some of the urgency that drove rushed decisions in hotter years. Buyers can afford to:

• Commission a full building survey before exchange, rather than relying on a mortgage valuation alone
• Use survey findings as genuine negotiating leverage on price or repair costs
• Take time over structural issues common in London's older housing stock, subsidence, damp, roof condition and period-property defects
• Factor the higher mortgage rate environment into affordability calculations, not just the asking price

With fewer competing offers, sellers are more likely to accept a price adjustment following a survey that flags genuine defects, something that was harder to negotiate when stock moved quickly.

What This Means for London Sellers

Lower forecast growth means pricing has to be realistic from day one. Overpricing in a market growing at barely 2% a year risks a long, stale listing. Sellers should consider:

• A pre-sale condition survey to identify and address issues before marketing, reducing the risk of late renegotiation
• Pricing in line with recent comparable sales rather than optimistic future growth assumptions
• Being prepared for buyers to request more detailed surveys than in previous years, and having documentation ready

A property that has already been surveyed and had issues addressed tends to move faster and attract fewer last-minute price cuts.

Owners Choosing to Improve Rather Than Move

With transactions down and price growth modest, more London homeowners are opting to extend, convert or renovate rather than sell. This brings its own compliance requirements:

• Party wall matters: Loft conversions, basement digs and extensions near a boundary typically require a Party Wall Award under the Party Wall etc. Act 1996
• Building regulations: Structural changes need sign-off to avoid problems at a future sale
• Valuation checks: Understanding how an improvement affects value is useful before committing significant capital in a low-growth market

What This Means for You

If you are weighing a purchase, sale or renovation in London against this backdrop, the practical message from the OBR house price forecast 2026 2027 transactions stamp duty data is this: move carefully, not fearfully. A RICS chartered surveyor can provide the independent evidence needed to negotiate confidently, price a sale sensibly, or plan an extension that complies with party wall and building regulation requirements. Speaking to a surveyor before exchange, before marketing, or before building work begins remains one of the most cost-effective steps in a slower market.

FAQ

Has the OBR said house prices will fall?
No. The OBR forecasts continued growth, just at a slower rate, 2.1% in 2026 and 2.5% in 2027, rather than a decline.

Why are stamp duty receipts falling if prices are still rising?
The OBR attributes the £17bn 2026-27 forecast, down from March's estimate, mainly to lower-than-expected transaction volumes rather than any rate change.

Does a slower market mean I should wait to buy?
Not necessarily. Mortgage rates remain the dominant factor; waiting for lower rates carries its own uncertainty. A survey-led, well-negotiated purchase now can still make sense.

Will rents keep rising in London?
The OBR has flagged a risk that higher tax on rental income could reduce long-run rental supply, which may add upward pressure on rents over time.

Should sellers price below market value to sell faster?
Not automatically, but realistic pricing matched to recent comparables, supported by a pre-sale survey, tends to perform better than optimistic pricing in a 2% growth environment.

Conclusion

The OBR's October 2026 downgrade to its house price and transaction forecasts confirms what many London agents have already sensed: this is a market defined by caution rather than crisis. Growth continues, but slowly; transactions continue, but fewer of them; and stamp duty receipts reflect that softer activity rather than policy change. For buyers, sellers and owners alike, the sensible response is the same, get independent, evidence-based advice before making a decision. Contact Prince Surveyors to arrange a building survey, valuation or party wall consultation before your next move.

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