In its Economic and fiscal outlook, published today, the OBR predicts prices will continue to fall in 2014-15, by 1.1%, before remaining static in both 2015-16 and 2016-17.
It expects prices to fall by 0.5% in 2012-13.
The OBR says that 2012-13 prices are assumed to grow in line with the median of independent forecasts, which is currently lower than the November forecast.
From then on, it says house prices are expected to rise in line with average earnings.
Meanwhile the OBR predicts residential property transactions will fall by 3.0% in 2012/13, decline by a further 1.9% in 2013/14, and then remain static for the next three years.
It says: “Compared to the November forecast we are now expecting volumes to be higher in 2011-12, reflecting a temporary pick up related to the end of the Stamp Duty exemption for first-time buyers in March 2012, before returning to a level similar to that in the November forecast.”
The OBR adds that the current depressed level of transactions is consistent with owner-occupiers moving only once every 30 years, compared to the long-run average of 19 years.
It says: “We are forecasting a relatively slow return to the long-run average, which is not quite complete by the end of the forecast period. By this time, and despite strong growth rates, the level of property transactions is still around 20 per cent below the pre-crisis peak.”