The Office for Budget Responsibility has cut its house price growth forecast for 2026 to 2.1 percent and warned that the Budget decision to raise property income tax will push rents higher while shrinking rental supply.
The downgrade, published alongside the Autumn Budget on 28 October, trims 0.3 points from the March forecast. The watchdog now expects 2.5 percent price growth in 2027, down 0.5 points, with transactions running about 4 percent below the March path at around 1.2 million this year rising to 1.3 million by 2031.
Budget timing gives the figures added weight for owners weighing sales, purchases or refinancing. With a further 2-point rise in property income tax due from April 2027 on top of the 2-point rise already planned, the OBR says returns face a material hit that will feed through to higher rents over time.
OBR cuts outlook as rates weigh on activity
The OBR said higher mortgage rates and weak real income growth will limit price gains. Its report said: “The outlook for house prices remains highly sensitive to the path of mortgage rates, the evolution in real incomes, and the impact of planning and regulatory changes on housing supply.”
Transaction weakness carries a fiscal cost. Property transaction taxes are forecast to raise £17 billion in 2026-27, down 0.6 percent on 2025-26. Against March, the OBR puts receipts £3.2 billion lower in 2026-27 and an average £3.9 billion a year lower across the forecast.
The report puts the shortfall down to lower than expected in-year receipts for residential and commercial sectors plus reduced forecasts for prices and transactions. It added that the Your First Home scheme could lift prices slightly by stimulating demand, but said the effect will be limited.
Rental tax warning points to higher rents
On rental tax, the OBR was direct. It said the two-point rise in this Budget on top of the two-point rise announced at Budget 2025 will both start in April 2027 and represents a material reduction in returns after a decade of measures that have already cut landlord margins.
Ben Beadle, chief executive of the NRLA, said the move will hurt renters. “The Chancellor has today made life harder for renters right across the country,” he said. “As the Office for Budget Responsibility has confirmed, hiking taxes will drive up rents and drive down supply in the rental market when demand is already way ahead of the number of homes available.”
The OBR set out two effects. First, fewer potential landlords will enter, cutting long-run supply when demand already outstrips stock. Second, remaining landlords will pass on costs through higher rents as leavers give survivors more pricing power and greater long-run scope to raise rents.
This follows Landlord Knowledge’s report on the Budget second 2 percent raid adding £400 to a typical landlord tax bill, which set out how the April 2027 start date concentrates two tax rises at once. The OBR assessment now confirms the rent consequence ministers had played down, while Zoopla data showing price falls across a third of homes points to a softer sales market alongside the tax squeeze. The combined picture is weaker capital growth plus tighter net income.
Official forecasts and fiscal detail are set out in the OBR Economic and fiscal outlook.
What this means for landlords
- If you plan to sell in 2026: price growth near 2 percent leaves little room for delay costs – get valuations based on achieved sales, not asking prices.
- If you plan to buy: lower transaction volumes can mean less competition but slower chains – price offers against longer sale times.
- Watch April 2027: two stacked 2-point tax rises start together – model net yield at the higher 24, 44 and 49 percent bands now.
- Review rents carefully: the OBR expects pass-through over time, but Renters Rights Act rules limit how and when rises can be made.
- Bottom line: growth is slowing while tax costs rise – cash flow and timing matter more than waiting for price gains.
Editor’s view
The OBR has joined up the dots ministers avoided. Taxing rental income harder while supply lags can only push in one direction on rents. Landlords who plan for April 2027 now will cope better than those who hope the forecast is wrong.
Author: Editorial Team – UK landlord and buy-to-let news, policy, and finance
Published: 29 October 2026
Sources: Office for Budget Responsibility, NRLA
Related reading: Budget second 2 percent raid adds £400 to typical landlord tax bill
