House prices would take a hit of as much as 18% if Britain leaves the EU, while mortgage interest rates would go up, according to new Treasury analysis.
Chancellor George Osborne said that a Treasury document on the short-term impact of Brexit, due for publication next week, will forecast people's homes will lose between 10% and 18% of their value by 2018 if Britain votes Leave in the June 23 referendum, compared to what they would be worth if the UK remains a member of the EU.
With the average UK home costing £292,000 and the Office for Budget Responsibility predicting rises of 9.4% over the next two years, this would be the equivalent of depressing the value of a typical residential property by £32,000-£57,500 by the middle of 2018 - with much higher losses for more expensive homes.
If borne out in reality, the forecast would not only wipe out the expected increase in property values, but leave homes worth between 0.6% and 8.6% less in cash terms than they are now.
Speaking during a meeting of G7 finance ministers in Sendai, Japan, the Chancellor said Brexit would make mortgages more expensive and make it more difficult for first-time buyers to obtain a home loan.
"If we leave the European Union there will be an immediate economic shock that will hit financial markets," Mr Osborne told the BBC. "People will not know what the future looks like. And 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%. And at the same time first-time buyers are hit because mortgage rates go up, and mortgages become more difficult to get. So it's a lose-lose situation.
"We all want affordable homes, and the way you get affordable homes is by building more houses. You don't get affordable homes by wrecking the British economy. And of course if we left the EU, mortgage rates would go up, it would become more difficult to get mortgages so they'd be hit as well."
Mr Osborne said that finance ministers from the other G7 countries - Japan, the US, France, Germany, Italy and Canada - had all told him that Brexit would harm the UK economically, while his French and German counterparts had made clear that the UK could expect to get a worse deal on trade than is available to EU members.
"Everyone here at the G7 in Japan is clear ... that it would be bad for the British economy if we left the European Union," said the Chancellor.
"It's absolutely clear, if you speak to the finance ministers here from France, Germany and other European countries, that if Britain left the EU and wanted access to the single market - the access that we need for jobs and investment at home - then we would need to pay into the EU budget, and we'd have to accept free movement of people but we'd have no say over those policies at all.
"And frankly if we left the EU, we would have a two-year period to negotiate our exit with 27 other countries, we'd then have to negotiate new arrangements with those 27 other European countries and at the same time conclude over 50 trade deals with countries that aren't even in Europe. In other words that would be extremely difficult to do.
"And throughout that period, businesses would have no certainty about what the future looked like, so they wouldn't hire people, they wouldn't invest. People wouldn't have certainty over what their future looked like. And all of that uncertainty would add to the economic costs of leaving the EU. It hits people's incomes, it hits the value of houses, it hits businesses and jobs. People are beginning to understand that."
Mr Osborne said the analysis provided by Treasury civil servants was "independent" and was backed up buy "a whole range of external views" including from Virgin Money's chief executive, the Centre for Economics and Business Research, ratings agencies Standard & Poor and Fitch and Deutsche Bank.
Analysis released by CEBR this week found a vote to leave the EU could result in the average UK house price being just over £2,000 cheaper by 2018 than if the country chooses to remain.
Its report, compiled for the National Association of Estate Agents (NAEA) and Association of Residential Letting Agents (Arla) found that the average price of a property in London would be £7,500 less by 2018 in the case of Brexit than it would be if there is a vote to stay.
Brexit would be expected to have a more pronounced effect on London property prices as the capital has been seen as a "safe haven" for foreign property investors.
Energy minister Andrea Leadsom said: "This is an extraordinary claim and I'm amazed that Treasury civil servants would be prepared to make it. 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, 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 June 23."