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Osborne says Brexit to hit house prices

Do Not UseDo Not Use 21/05/2016
A view of housing in Bristol, England © Getty Images A view of housing in Bristol, England

A UK vote to leave the European Union would cause an "immediate economic shock" that could hold back growth in house prices, the chancellor has said.

In the event of a vote for Brexit, by 2018, houses could be worth up to 18% less than if the UK voted to remain, George Osborne told the BBC.

But former Business Secretary Sir Vince Cable said a price fall would be good for affordability and economic balance.

G7 finance ministers said Brexit could cause a "shock" to the world economy.

Labour attacks 'skyrocketing' rent rises

The UK's EU vote: All you need to know

An analysis by the Treasury to be published next week will suggest that two years after a Brexit vote, UK house prices could be between 10% and 18% lower than after a remain vote, Mr Osborne told the BBC.

"If we leave the European Union, there will be an immediate economic shock that will hit financial markets... People will not know what the future looks like," he said.

"And 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... And 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," he added.

Analysis

By BBC political correspondent Chris Mason

With four and a bit weeks to go until referendum day, voters find themselves swimming in a murky ocean of questionable statistics.

And when I say questionable, I'm being polite.

August bodies and grand figures on both sides are making bold claims. And they are both guessing.

So what's happening here? Each side is playing what it sees as its greatest hit.

The let's stay in brigade talk about the economy. The more grabby the headline, the more people who will notice.

The let's get out brigade talk about immigration. The more grabby the headline, the more people who will notice.

There will be plenty more claims where these came from before you pick up that stubby little pencil in a draughty polling station.

The G7 finance ministers said after two-day talks in Japan: "Uncertainties to the global outlook have increased, while geopolitical conflicts, terrorism, refugee flows, and the shock of a potential UK exit from the European Union also complicate the global economic environment."

Mr Osborne's comments echo those made by the International Monetary Fund last Friday, which said Brexit could cause a "sharp drop" in house prices.

But energy minister Andrea Leadsom, of Vote Leave, said: "This is an extraordinary claim and I'm amazed that Treasury civil servants would be prepared to make it.

"The truth is that the greatest threat to the economy is the perilous state of the euro; staying in the EU means locking ourselves to a currency zone - which Mervyn King, ex-governor of the Bank of England, has rightly warned 'could explode'.

"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 23 June."

Sir Vince tweeted: "Osborne on house prices. Surely big price fall good for affordability and economic balance. Stick to jobs and basic economics George."

Former Work and Pensions Secretary Iain Duncan Smith said financial forecasting was handed over to the independent Office for Budget Responsibility because Treasury reports could not be trusted.

"When I heard that I did think of Pinocchio and the nose growing rather long here," he told Sky News.

"Even the Treasury report has to admit that even under their most pessimistic forecasts the British economy would continue to grow after we left the European Union.

"And this report also says that house prices would continue to grow."

Campaigners for Vote Leave have previously said that lower house prices would help first-time buyers and those in the rental market.

"After we Vote Leave, we will be able to fix our broken migration policy whilst supporting the construction industry with the talent it needs," Vote Leave chief executive Matthew Elliott said on Thursday.

"The biggest pressure on housing supply is immigration which has made buying your first home and even renting unaffordable for many."

On Thursday, estate agents claimed a Brexit take around £2,200 off average house prices by 2018.

Ratings agency Moody's also said that curbing immigration would ease competition for housing, and slow down house price and rental inflation.

Also on Saturday, former Prime Minister Gordon Brown urged mothers to vote for the UK to stay in the EU for the sake of their children.

He told a conference of left-of-centre think tank the Fabian Society: "To mothers who are worried about the prospects for their children in the future and want to know where the jobs will come from, to people who feel that globalisation is a runaway train and it's out of control and uncontrollable, we've got to show that we can manage that in the public interest."

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