The projection comes from the OBR following changes announced in last week’s Budget which means that people will not be forced to take an annuity when they retire and can instead invest the money as they wish.
Many people are expected to use their pension pot to invest in property, rather than poor performing pensions, driving up home prices in the process.
The OBR has revised its forecast for residential property price growth in the UK in the next five years from 27 per cent to 30.8 per cent.
According to the OBR, growth of 8.6 per cent is anticipated in 2014/2015, 7.4 per cent in 2015/2016, 4.3 per cent in 2016/2017, 3.7 per cent in 2017/2018 followed by another 3.7 per cent in 2018/2019.
The independent fiscal body estimates that by the end of the forecast period, home prices are estimated to be 0.5 per cent below their pre-crisis peak in real term, with the home price to income ratio set to be 2.3 per cent below its pre-crisis peak.
The OBR also expects transaction volumes will increase at a faster pace than originally forecast over the coming five years. It estimates that housing transactions in 2014/2015 will be 1.28 million, some 6 per cent higher than it forecast in December.
The OBR also forecasts that Stamp Duty receipts will rise 90 per cent over the next four years from £9.5 billion in 2013-14 to £18.1 billion in 2018-19.
The OBR report said: “House prices have continued to accelerate since our December forecast with annual growth reaching 5.5 % in December 2013.
“We expect house prices to peak earlier than in our December forecast at 9.2 per cent in the third quarter of 2014, with prices rising by around 30 per cent by 2018-19.”