The Office for Budget Responsibility predicts that house prices will fall 10% by 2025, with prices not expected to recover until 2027-28.
The predicted fall is 1 percentage point larger than in its November forecast.
This is alongside a predicted 20% fall in property transactions relative to the fourth quarter of 2022.
Indicators from Halifax and Nationwide suggest that house prices have already fallen by 3-6% between their peak in the middle of 2022 and February 2023.
The OBR says low consumer confidence, a squeeze on real incomes, and the expectation of mortgage rate rises to come are expected to contribute to continued falls in house prices and a reduction in housing market activity.
Polling commissioned by the Liberal Democrats showed almost two in five (38%) 2019 Conservative voters are less likely to back the party if house prices fall by 10% next year.
Liberal Democrats are calling for a £3 billion Mortgage Protection Fund to support families who are struggling to pay their bills.
Liberal Democrat spokesperson for Levelling Up, Housing and Communities, Helen Morgan MP, said: “For millions of families and pensioners this Budget is Jeremy Hunt’s house of horrors. People are seeing their house prices tumble, yet support from the Chancellor is nowhere to be seen.
“This is more proof that the out of touch Conservative Ministers are failing millions of hardworking families across the country.
“Rather than helping big banks the Government should introduce a Mortgage Protection Fund to protect families and pensioners from the Government’s spiralling rates.”
