House prices could fall by as much as 18% in two years if the UK votes to leave the European Union, according to George Osborne. The Chancellor said a Treasury document forecasting the short-term impact of a Brexit, which is due to be published next week, will say that the value of people’s homes will fall in value between 10% and 18% by 2018.
An average home in the UK costs £292,000 and this is currently forecast to rise by 9.4% over the next two years, says the Office for Budget Responsibility.
But Mr Osborne said that, if the UK voted to leave the EU on 23 June, the effect on house prices would be the equivalent of a loss of £32,000 to £57,500 by the middle of 2018. The loss for more expensive homes would be even higher, he said.
Speaking during a meeting of G7 finance ministers in Japan, the Chancellor said mortgages would also become more expensive and first-time buyers would find it more difficult to get a home loan if the UK was not in the EU.
He told The Social Magazine there would be “an immediate shock that will hit the financial markets”.
“People will not know what the future looks like and, in the long term, the country and the people in the country are going to be poorer.
“That affects the value of people’s homes and the Treasury analysis shows that there would be a hit to the value of people’s homes by at least 10% and up to 18%.
“And at the same time first-time buyers are hit because mortgage rates go up, and mortgages become more difficult to get. So it’s a lose-lose situation.
“We all want affordable homes, and the way you get affordable homes is by building more houses. You don’t get affordable homes by wrecking the British economy.”
In April, he said that leaving the EU will cause the UK’s economy to shrink by 6% by 2030.
Mr Osborne described the analysis provided by Treasury civil servants as “independent” and was backed up buy “a whole range of external views”.
Energy minister and Brexit campaigner Andrea Leadsom, however, was not convinced.
She said: “This is an extraordinary claim and I’m amazed that Treasury civil servants would be prepared to make it.
“The truth is that the greatest threat to the economy is the perilous state of the euro; staying in the EU means locking ourselves to a currency zone – which Mervyn King, ex-governor of the Bank of England, has rightly warned ‘could explode’.
“The safer option in this referendum is to take back control of the vast sums we send to Brussels every day and Vote Leave on 23 June.”