EU exit to see house prices hit, say estate agents

A UK exit from the European Union could wipe thousands of pounds off house values over the next three years, estate agents have claimed.

Homeowners in London could lose as much as £7,500, while homes elsewhere in the UK could lose £2,300, the National Association of Estate Agents said.

The report, jointly commissioned by the Association of Residential Letting Agents, said rents could also fall.

The Vote Leave campaign said first-time buyers would welcome a drop in prices.

The study suggests that prices in London would be hit by a slump in demand from foreign buyers, particularly those from EU countries.

In 2013, 17% of homes sold in the middle of the capital went to EU nationals.

The figures suggest prices would continue to rise, but at a slower rate.

If the UK did not maintain free movement of labour after a vote to leave, the research claims the population of the UK could fall by more than a million people, as EU workers return home.

A separate research note from the ratings agency Moody's said a leave vote could be good news for first-time buyers.

"First-time buyers would benefit from lower competition for housing, as house price and rental inflation would slow down if immigration is curbed," said Gaby Trinkaus, a vice president and senior analyst at Moody's.

The research - carried out by the Centre for Economics and Business Research (CEBR) - suggested a British exit could reduce the total value of UK housing by as much as £26.5bn by 2018.

As far as rents are concerned, it calculated that the impact would be minimal in the first two or three years.

EU nationals living in the UK are more likely to be renters than homeowners, it said.

So if fewer were to come to the UK in the longer term, country-wide rents could be impacted "more severely".

However, landlords said that if rents fell too far, many might sell up.

"If demand eases to such an extent that landlords cannot recuperate costs, we'll likely see a mass exit from the market, which would then just have the opposite effect on demand as supply falls - and we'd be back to square one," said David Cox, managing director of the Association of Residential Letting Agents (ARLA).

The Vote Leave campaign said that both renters and first-time buyers would benefit from a UK exit.

"The biggest pressure on housing supply is immigration which has made buying your first home and even renting unaffordable for many," said Matthew Elliott, chief executive of Vote Leave .

However the chancellor, George Osborne, has previously warned that first-time buyers would see higher mortgage payments in the event of a British exit.

Construction

The report also warns that a vote to leave could lead to fewer new homes being built, because of a shortage of construction workers.

About 5% of construction workers in England and Wales were born in other EU countries, according to the 2011 census.

If such workers could no longer travel so freely to the UK, estate agents say the skills shortage might be severe.

"We simply wouldn't have the resource to put the bricks and mortar together," said Mark Hayward, managing director of the National Association of Estate Agents (NAEA)

"It has the potential to have a very damaging effect on the future housing market."

Correction 14 June 2016: This story has been amended to clarify that the report suggests prices will continue to rise but at a slower rate.