Will House Prices Go Down if We Leave the EU?

There are now less than three weeks to go before the EU referendum, and many headlines have been cropping up about how the property market would be affected by a Brexit. So will house prices go down if we leave the EU?

In the news

While the Chancellor has claimed that a Brexit would badly hit house prices, some members of the property industry have called for a vote to leave the EU. Additionally, a recent report insists that first time buyers would benefit from a Brexit, as demand would reduce and house prices and rents would come down.

However, two key organisations in the property sector believe that house prices will continue to increase whether we stay in or leave the EU, while homeowners don’t think prices will be affected by the vote.

Analysis by the Treasury suggests that the average house price could be between 10-18% lower by 2018 if we vote to leave the EU.

Will House Prices Go Down if We Leave the EU?

Will House Prices Go Down if We Leave the EU?

Will prices definitely come down?

But prices won’t necessarily come down. Despite a slowdown in the wider economy, house prices are still rising fast. In the year to March 2016, property values increased at a rate of 9% annually, according to the Office for National Statistics (ONS). And prices are forecast to rise by a further 10% by the end of 2018, says the Office for Budget Responsibility. This means that if prices were 10% lower than they would otherwise be by 2018, prices could actually be flat on today’s figures.

Why will house prices be affected?

The Treasury’s economic modelling indicates that a Brexit would increase the general cost of borrowing in the UK. This, in turn, would dampen demand for housing and lead to fewer property transactions, causing a drop in house prices.

Some insist that a Brexit would restrict foreign investment in the UK, particularly from EU citizens, which would especially hit the top end of the London property market. Over recent years, the prime London market has been the home of cross-border investment between Europe and the UK.

However, other industry professionals claim that the UK, particularly London, market is naturally resilient to a Brexit, as it has always has a draw for foreign investment.

How bad will it be?

The current lack of housing supply could prove resistant to a sharp decline in prices. Although no one has predicted a significant rise in prices in the event of a Brexit, it is difficult to determine what the scale of the negative impact would be due to huge uncertainties around supply, demand and the price of credit.

But with house prices increasingly out of the reach of many young people in the UK, some say that a substantial decrease would help make housing more affordable. Chris Grayling, the pro-Brexit Conservative Lead of the House of Commons, argues that staying in the EU will make it even harder for prospective first time buyers to purchase a home.

How do you believe house prices will be affected by a vote to leave the EU?

Remember that today is your last chance to register to vote in the 23rd June EU referendum.

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