House prices: Will first-time buyers benefit from Brexit?
05-30-2016
Even the Leave campaign admits that houses might decline in value
Will first-time buyers benefit from Brexit? It is becoming a matter of consensus that house prices will decrease significantly in the event of a Leave vote at the EU referendum in June – but there is considerable debate over whether or not that is bad thing.
Following in the footsteps of the International Monetary Fund, the Chancellor George Osborne, Bank of England governor Mark Carney and the ratings agency Fitch, two more reports out today state that a Brexit would wipe value off UK housing.
One study, commissioned by the National Association of Estate Agents and carried out by the Centre for Economics and Business Research, estimates the total value of UK housing could fall by as much as £26.5bn by 2018. "Homeowners in London could lose as much as £7,500, while homes elsewhere in the UK could lose £2,300," notes the BBC.
The research points to falling demand from overseas buyers – and also speculates that reduced demand for rental properties could prompt private landlords to sell up.
Elsewhere, the ratings agency Moody's published a note that similarly predicted that house prices would fall in the event of a victory for the Leave campaign. Its rival Fitch had previously said that valuations could decline by as much as 25 per cent.
Here is where the narrative is open to interpretation, however.
Mostly, such forecasts are presented as a cautionary tale for homeowners, but Moody's is clear that the trend would be good news for first-time buyers. Gaby Trinkaus, a vice president and senior analyst at the agency, said prospective owners would "benefit from lower competition for housing, as house price and rental inflation would slow down if immigration is curbed".
Fitch had similarly indicated that a correction in prices might not be so bad, as the fall in prices would merely bring average property values back down to a "sustainable" level.
A spokesman for Vote Leave admitted that house prices could drop but echoed the potential benefits for many, particularly younger, households. "The biggest pressure on housing supply is immigration which has made buying your first home and even renting unaffordable for many," said Matthew Elliott, the campaign group's chief executive.
Not everyone is convinced. Osborne said that while house prices would fall, thereby hurting homeowners, benefits for new buyers would be offset by a sharp rise in interest rates in the years after the vote to combat an expected surge in inflation.
Separately, the National Association of Estate Agents warned of a skills shortage in construction if EU workers depart en masse, which would threaten future housebuilding. "We simply wouldn't have the resource to put the bricks and mortar together," said managing director Mark Hayward. "It [a Leave vote} has the potential to have a very damaging effect on the future housing market."