Britain’s Chancellor just launched a damning indictment over the state of nations’ property market and related household finances, if the public voted to leave the European Union — dubbed a Brexit.
He said on ITV’s Peston on Sunday programme that Britain’s housing market would take a significant hit if Brits opted for a Brexit in the referendum on June 23.
The two major hits would be:
1. House prices would crash — This is particularly bad for those owning a home already because it likely means that they would be in negative equity and would either need to sell their home at a loss if they wanted to move or as an investor, the value of their asset would slump.
2. Household’s would be poorer — Even though lower house prices would signal more people would be able to afford to get on the housing ladder, Osborne warns that mortgage products would rise and therefore people wouldn’t necessarily be able to afford to buy a home anyway.
“This isn’t just a big question about who we are as a country. This goes to the heart of people’s financial security,” said Osborne on the ITV programme.
“I am pretty clear that there will be a significant hit to the value of people’s homes and to the cost of mortgages. That is one example of the kind of impact, economic impact, that we get from leaving the EU.”
Osborne that Britain’s Treasury will publish a dossier about the short term impact of a Brexit on the nation’s housing market soon, which include how it will hurt property values and lead to higher mortgage costs.
At the moment, he said, the Treasury’s long term projection is that households would be £4,300 worse off, on average, within 15 years of a Brexit.
Here is a snippet of the full interview:
The average price to buy a house in Britain now stands at £291,504, according to the Office for National Statistics. Meanwhile, the average London property price is at a huge £551,000.
Property prices in London are largely driven by international buyers and Osborne argues that if these people exit the market in the event of a Brexit, this will cause a crash in prices.
However, this sounds like kind of good news to a lot of Britons, especially Londoners, that feel house prices are reaching a ceiling because so many people can’t afford it.
But Osborne explains that this isn’t a respite for those looking to get on the property ladder — it will actually make mortgage products more expensive because banks will need to shore up costs on risk of a default.
So in other words, Osborne said that buyers are sellers of property will be really hurt in the event of a Brexit, and this is what voters need to consider when voting in the referendum next month.