A vote to leave the EU would have a ‘major hit’ on residential property prices across the UK and increase the cost of taking out a mortgage, according to the chancellor George Osborne.
The latest scare tactics being adopted by the government to keep Britain in the EU has seen the chancellor warn about the short-term impact of Brexit, insisting that property prices could drop significantly if voters opt to leave the EU on 23 June.
Making an appearance on the first episode of ITV’s Peston on Sunday, Osborne said: “I’m pretty clear that there will be a significant hit to the value of people’s homes and to the costs of mortgages. That is one example of the kind of impact, economic impact that we get from leaving the EU.”
Osborne would no doubt dismiss claims that he is trying to scare voters into remaining in the EU. After all, he is in the same camp as David Cameron, the prime minister who has styled himself as the leader of “Project Fact”.
But while very few people would disagree that the ‘in’ camp, supported by Cameron and Osborne, has run a persistent campaign of fear, the early signs are that the chancellor’s prediction about short-term prospects for house prices may actually prove accurate.
The reality is that there is nothing that spooks markets more than uncertainty, as was evident in the run-up to the Scottish referendum in 2014, when the housing market north of the border ground to a virtual halt.
“These have been turbulent times and uncertainty is the very thing that the property market hates,” said Saul Empson from Haringtons UK.
Earlier this week, the chief executive of Virgin Money, Jayne-Anne Gadhia, also warned that a Brexit could place downward pressure on property prices in the UK, especially in the capital, not to mention push up interest rates.
She told the press that a vote to leave the 28-member bloc in next month’s referendum could lead to a sharp drop in the amount of foreign investment into London’s property market from abroad.
“My personal view is that property prices would be likely to come down, as inward investment, particularly in London, is less available,” she said. “The risk on a Brexit is I think that property prices come down and interest rates go up.”
Despite concerns that a Brexit will have an adverse impact on the housing market, many property experts, such as Trevor Abrahmsohn at Glentree Estates, believe that the UK housing market will do well outside of Europe.
“I think that the chancellor must believe that the British electorate have all just ‘come off the onion boat’ and that we are too stupid to make sense of what is going on,” he said.
“The government is blaming every element of bad economic news on the Brexit campaign.”
While uncertainty may suppress activity in the property market over the next few weeks, the reality is that the EU referendum is a relatively short campaign, and whether the UK votes to stay in or out, the fact remains that there is a severe housing shortage that will inevitably drive home price up further in the medium to long term.