Yesterday we had the chancellor’s Spring Statement and, given everything else going on in the world, it was really easy to miss it.
The government had committed to keeping the November Budget for changes to tax and spending and the Spring Statement to focus on economic updates, and true to their word, that is what happened.
As the war in the Middle East has only just started, its full impact is not included in the new forecasts. But from a housing market perspective, there are a number of reasons to be cheerful.
The key takeouts from the Spring Statement are:
- Economic Growth: The Office for Budget Responsibility (OBR) forecasts GDP growth of 1.1% in 2026, rising to 1.6% in 2027 and 2028, and 1.5% in 2029-30.
- Inflation: The inflation rate is expected to fall from 3.4% in 2025 to 2.3% in 2026 and 2.0% thereafter.
- Unemployment: The unemployment rate is projected to rise to 5.3% this year, which is expected to be the peak and then fall in every year, ending the parliament at 4.1%.
- Tax Measures: The Chancellor has confirmed that no new tax-raising measures will be announced, and key tax thresholds will remain frozen until April 2031.
- Energy Costs: Energy bills are expected to decrease by £150 from next month, although rising energy prices due to the conflict in the Middle East could impact inflation.
- After accounting for inflation, people are forecast to be over £1,000 a year better off.
- Borrowing is set to be £18 billion lower, according to the OBR, compared to the autumn forecast. Public Sector Net Borrowing is set to fall from 4.3% this year, to 3.6% next year, then 2.9%, 2.5%, and 1.8% in 2029-30.
On balance, it would be great to see growth at an even higher level, but we are still forecasting growth that is broadly in line with expectations. More encouragingly, falling inflation and improving unemployment levels mean we should see easing affordability pressures and bolstered consumer confidence, all of which bodes well for the housing market this year and into the future.
We will, of course, have to see how the MPC views the impact of a war in the Middle East on the possibility of a rate cut in the near term.
Simon Jackson is Chief Executive Officer of SDL Surveying