House prices would slump with Brexit, claims Osborne
05-10-2016
Treasury to claim that property market will be hit and mortgages will get more expensive if Britain leaves the EU
As the campaign ahead of the June referendum heats up after the conclusion of the local elections, Chancellor George Osborne told ITV's Robert Peston that Treasury analysis to be published this week will set out a series of economic hits which would be caused by leaving the bloc.
"The value of people's homes will be affected and people trying to get on the housing market will be hit because mortgage prices will go up. This is an example that this isn't just a big question of who we are at the moment, it also goes to the heart of people's financial security," he said.
One potential factor propping up rapidly rising prices in recent years has been investment from overseas investors that some say could dry up in the event of a vote to leave the EU. The uncertainty that would be caused could also more directly undermine confidence at home, which could lead to a reduction in transactions and a consequent fall in prices.
The latest Halifax house price index showed prices easing in April, as the market calms after a surge in activity caused in large part by investment buyers seeking to beat a rise in stamp duty on second homes at the start of the new financial year.
Average house prices fell 0.8 per cent in April compared to March, the BBC reports, meaning the annual increase slowed from 10.1 per cent to 9.7 per cent. Earlier this month, Nationwide reported that annual price rises fell from 5.7 per cent to 4.9 per cent in April.
Commenting on the figures, Howard Archer, the chief economist at IHS Economics, echoed Osborne and said that uncertainty over the EU referendum was also likely to "rein in" housing market activity for the next few months. An "assumption" that voters will opt to remain will give the market renewed momentum in the second half of the year, he added.
Halifax said that confidence in the housing market was at its lowest level in more than a year, but added: "The severe imbalance between supply and demand… combined with low interest rates and rising employment and real earnings, should continue to push house prices up over the coming months."