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EU exit would be bad news for property owners and buyers

Chancellor George Osbourne has claimed Britain's property market will take a huge hit if voters decide to leave the European Union during the referendum on the 23rd June.

During an interview with Robert Peston, Mr Osbourne said the issue of an EU exit was not just about the identity of the country, but also about financial security.

The Chancellor claimed he was confident that there would be a sizeable hit to the value of homes and an increase in mortgage costs should Britain leave the EU, alongside a whole host of other economic impacts.

The Treasury is soon to release a dossier with research and figures on how a British Exit from the European Union would affect the short term of the property market, including more details on how it will damage property values and result in higher mortgage costs. Giving a glimpse into the details of the report Osbourne said, the Treasury had generated a long term projection which showed the average household would be worse off by £4,300 15 years after the proposed exit from the EU.

If the Treasury's prediction is correct it would leave those already owning a home in a worse position – their property could be worth less than they paid for it, and should they need to move they could face selling at a loss.

Structural Defects Insurance

While at first glance a drop in prices may seem like good news for buyers, the Treasury believe that mortgage rates would rise and the higher repayment costs would mean less people would be able to afford to get on the property ladder anyway.

One area of Britain that could be affected the most is London, where property prices are largely influenced by overseas buyers and investors. Should investors reduce or pull out entirely from investing in the UK after an EU exit then there could be a crash in London property prices.

With the average London home costing £551,000, this may sound like good news, but the Chancellor believes that it will cause banks to shore up on risks of default and so mortgages will be more expensive and harder to obtain.

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