UK Treasury: House prices Will Fall If Britain Leaves EU

British house prices could plummet by up to 18 percent if the country leaves the European Union, the Treasury says — a claim ruled out as scaremongering by campaigners for a U.K. departure from the bloc.

House prices could take an 18% hit over the next two years and there would be a “profound economic shock” that would lower property values and increase the cost of mortgages, Treasury chief George Osborne warned if the UK votes to leave the EU.

“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 the Treasury analysis shows that there would be a hit to the value of people’s homes by at least 10% and up to 18%,” he said on Saturday while speaking at the G7 summit in Japan.

British house prices rose 9 percent in the year to March, and the value of property is something of a national obsession — especially in London, where the average home costs 535,000 pounds ($775,000), more than 10 times the average annual household income.

Some economists think a fall in house prices would be a positive thing because it would help new buyers currently priced out of the market. Others argue any benefit would be offset by a rise in mortgage rates and economic instability.

Many international banks and ratings agencies have warned that leaving the EU would destabilize the economy, and Bank of England Governor Mark Carney said earlier this month that a British exit, or Brexit, could tip the country into recession.

Osborne said allies including France, Germany and the United States agreed that “it would be bad for the British economy if we left the European Union.”

But Energy minister Andrea Leadsom, who backs a “leave” vote in Britain’s June 23 referendum, said Saturday that “the greatest threat to the economy is the perilous state of the euro” currency used by 19 EU states.

“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, the 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,” she said.

UK Treasury: House prices Will Fall If Britain Leaves EU