A Brexit vote could cause house prices to plummet by £2,300 nationally and £7,500 in London, new research has revealed.
According to a joint study by the National Association of Estate Agents and the Association of Residential Letting Agents, the average UK home could cost £303,000 by 2018. In London the average price of a home would be £599,200.
This would occur primarily as a result of a slowdown in the London market due to a fall in foreign investment.
In the event of a Brexit vote, London could lose its status as a safe haven for foreign investment. Foreign companies with European headquarters in the capital could also choose to relocate, reducing demand for both commercial and residential properties.
The report said that exiting the European Union could wipe a staggering £26.5 billion off total property values.
Mark Hayward, managing director of the National Association of Estate Agents, said: “Unfortunately, it’s not as simple as saying that Brexit would have a positive or negative effect on the property market. We might like to believe, for example, that the ease in demand and lower prices will allow first time buyers a route into the market, but any transactions may be put off for the short term until the period of uncertainty is over.
“An ease in demand is likely to be matched or outweighed by a decrease in housing stock, not just from reduced labour, as considered in the research, but also from decreased accessibility to building materials produced in non-UK EU countries. Ultimately, it could have long-lasting and damaging consequences.”
The research also found imposing greater restrictions on foreign workers coming into the UK as a result of a Brexit vote could hit the UK’s ability to build homes.
About one in 20 current construction workers were born in non-UK EU countries, according to the 2011 census.
Hayward said: “An ‘out’ vote could mean that in ten years’ time we’d find ourselves with a severe skills shortage of construction workers. So even if we then had planning permission, investment and materials to build more housing, we simply wouldn’t have the resource to put the bricks and mortar together. It has the potential to have a very damaging effect on the future housing market.”
The impact of Brexit on the rental market would be minimal in the first two to three years following the referendum. However, country-wide rents could be hit more severely in the long term.
Chancellor George Osborne has warned that a Brexit vote could lead to property prices crashing and interest rates going up.
However, experts remain unconvinced. Many analysts believe that a rise in interest rates is unlikely as the Bank of England would want to shore up confidence following a Brexit vote, even if the pound plummets and inflation rises.
As demand exceeds supply by such a degree in the UK housing market, there is also a strong possibility long-term prices will not be hit.
The general consensus amongst analysts is that while property prices in London will likely fall if the UK decides to break away, house prices in the rest of the country are likely to weather the market turmoil.
A recent report from the Royal Institute of Chartered Surveyors said that as the low-to-middle priced property market is directed by domestic participants, uncertainty has had less impact on demand and house prices at this end of the market when compared to the higher end.
