Falling house prices? Yes please, Mr Osborne!

In an interview on the first Robert Peston Sunday Politics show, George Osborne warned that house prices would fall in the event of a British exit from the EU.

The Chancellor said that first time buyers would also be hit by increasing mortgage costs:

“There would be a significant shock to the housing market that would hit the value of people’s homes, that would hit the cost of mortgages”.

“We’re doing the work on it now but the emerging Treasury analysis backs up what you are hearing from major banks like Virgin Money that the value of people’s homes will be affected and people trying to get on the housing market would be hit because mortgage costs would go up.”

A lead figure in the Remain campaign, the Chancellor would only make this warning if he thought that it would help the campaign. But is that assumption correct?

Putting aside those who will dismiss the Chancellor’s warning as just another threat from the Remain Campaign’s “Project fear”, how will voters who take the Chancellor’s warning at face value respond?

Will they rush to vote for Britain to remain, or will the warning backfire, encouraging a significant number to vote for Britain to leave?


There is reason to think that the warning could backfire thanks to widespread concern about the UK’s housing crisis, where rising house prices are becoming increasingly unaffordable and there are fears that the market is overheating.

There is concern over a lack of affordable housing, but also over rising levels of inequality associated with rising house prices.

Rising house prices increase the divide between people based on what property they own. With a 10% increase in the value of property, someone who owns a £1,000,000 home will see the value of their home increase by £100,000 while someone who owns a £100,000 property will see it gain £10,000 in value. Meanwhile, someone with no property is effectively poorer at the point of purchasing – having to fork out extra to get on the housing ladder.

This rising inequality is largely inter-generational. Baby boomers became adults at a time when housing was affordable. But young people today are growing up in a time when the bottom rung of the property ladder is often out of reach and, what’s worse, is only going upwards.

This hurts social mobility as inheritance becomes more important.

Whether or not one’s parents or grandparent’s own UK property should not become more important. No one wants to see people depend on their relatives dying to own a house, and no one wants to see people whose ancestors own no property increasingly penalized for that fact. And yet that is the direction we are heading in.
So Mr Osborne might think twice before warning that house prices would fall in the event of a British exit from the EU, because a lot of people want house prices to fall.

Reduced house prices would be welcomed by those concerned by rising levels of inequality, by those who do not own a home but would like to do so, and by those who want their children to be able to afford a house without parental help.

The Chancellor realises that first time buyers would like house prices to fall – hence his warning that the price of mortgages would rise. But he doesn’t give detail. It’s entirely plausible that even if the price of mortgages rose, Brexit would still present an opportunity for first time buyers.


To conclude, the Chancellor appears to be counting on there being more homeowners worried at the prospect of falling house prices than others relieved at the prospect.

If we assume that all property owners consider the value of their property to trump other considerations, then Osborne is safe – a majority – 64.8% – are homeowners, even if the number has been in decline.

But not all homeowners will be so entirely preoccupied with their own wealth. Many would prefer a more equal society than a less equal one. They would also like there to be affordable housing available for their children.

Altogether, there must be an impressive coalition of people who would like house prices to fall. So to the extent that people will pay attention to the Chancellor’s warning, it could well backfire.