Osborne warns of 10%-18% hit on house prices from Brexit
A vote to leave the EU would hit UK house prices by between 10 per cent and 18 per cent, George Osborne has warned, in an escalation of the referendum rhetoric.
The intervention is the first time that the chancellor has put specific estimates on his claim that property values would be affected by an “immediate economic shock” if Britain voted to leave the EU in June.
The Treasury estimates that, by mid-2018, house prices would be at least 10 per cent below their expected trend. But that leaves open the possibility that prices would continue to rise in the years following a vote for Brexit.
The independent Office for Budget Responsibility forecasts that house prices will rise 9.4 per cent by mid-2018 and a further 5 per cent over the following year. Most homeowners have benefited from substantial appreciation, with house prices increasing 9 per cent in the year to March ahead of changes to stamp duty.
Supporters of a British exit from the EU have accused Mr Osborne of “panicking” and of being “desperate not to talk about the NHS”, by bringing house prices into the debate.
Andrea Leadsom, a Eurosceptic minister, called the chancellor’s latest claim “extraordinary”, adding: “I’m amazed that Treasury civil servants would be prepared to make it.
“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 June 23.”
The Vote Leave campaign said “the temptation to fiddle the figures, to nudge up a growth forecast here or reduce a borrowing number there to make the numbers add up, has proved too great”.
The satirical magazine Private Eye has also mocked the government’s apocalyptic warnings around Brexit: its latest cover featured David Cameron, saying “There could be a world war!”, with Mr Osborne replying, “Or even worse, house prices might fall!”
The Treasury is not publishing its detailed forecasts for the potential effect of Brexit until next week, before a pre-referendum purdah on government activity. Announcing his comments, Mr Osborne did not make clear what year he was assuming Britain would leave the EU in case of a Leave vote.
“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,” he told the BBC on Friday. “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.
The chancellor’s warning contrasts with the more nuanced picture painted by analysts. Moody’s, the credit rating agency, said this week that, in the case of Brexit, “first-time buyers would benefit from lower competition for housing, as house price and rental inflation would slow down if immigration is curbed”.
In addition, economists have questioned whether mortgage rates would increase in the event of Brexit, with many saying that the Bank of England is more likely to cut its lending rate in response to any economic slowdown.
Approbation for rising house prices has long been central to British political debate. But booming prices in London and the south-east have triggered a new emphasis on the need for cheaper housing.
On Friday, the Daily Mail, a tabloid newspaper usually enthusiastic about rising property values, published a front-page story blaming immigrants for the “housing crisis”.
Mr Osborne nodded to the shifting debate, saying: “We all want affordable homes and the way you get affordable homes is by building more houses.”