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Luxury London property prices 'could halve if euro zone breaks up'

by Deleted Subscriber Content
31st May 12 4:19 pm

The price of luxury central London properties could plummet if the eurozone breaks up and the safe haven appeal of sterling diminishes, according to a report.

Buyers could be tempted to pick up cheaper alternatives on the continent due to the weaker European currencies, Development Securities’ report said.

Economic strife in Europe and political upheaval in North Africa and the Middle East has encouraged investors to buy luxury properties in the capital, seeing the area as a safe haven.

Property consultant Knight Frank found the prices of the best London homes went up by 44 per cent in the last three years, which is more than double the increase the capital has seen as a whole.

Development Securities chief executive Michael Marx said: “The prime central London residential market has seemingly defied the laws of gravity in the past few years.

“The ‘safe haven’ effect has clearly played its role in attracting foreign money into London’s most desirable post codes.

“However, the property industry knows, perhaps better than most that nothing goes on forever – there are powerful forces at work that may have a considerable impact on prices going forward.”

But MyLondonHome.com managing director Steven Herd dismissed the notion that the prices of luxury properties in London could crash if the eurozone was thrown into further chaos.

“I think it’s very unlikely. We do have some concerns but I think the concerns will be outweighed by the amount of money flowing into London and would carry on, even if a Greek exit happened and the whole eurozone was unstable.”

Herd said the reaction of the markets this week, when yields UK government 10-year bonds had dropped to record lows, demonstrated that the country was still seen as a safe bet.

“The only unknown effect a Greek exit would have is on the banks and if they stopped lending, which could slow down the market.

“We experienced that in 2008, but our statistics showed that some apartments in central London carried on seeing growth in that time. Some dropped five or 10 per cent, but 50 per cent is a long way off.”

Buyers from the likes of Greece, Italy and Spain have been looking to established markets in London to buy property, said Herd, whereas more experienced investors may hunt for the next boom area.

“It’s all about safety,” Herd concluded.

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