House prices in the prime central London housing market could plummet by as much as 50 per cent if the single euro currency was to collapse, experts have warned. Research conducted by consultancy Fathom on behalf of Development Securities shows that while prime property prices in the centre of the capital have been 34 per cent higher than the rest of the UK and 30 per cent higher than Greater London since 2009, they could halve over the next five years in the event of a eurozone breakup.
This is in spite of the likelihood of prime central London values enjoying a short-term increase, as investors will shift their funds away from the city to the rest of the continent once it becomes clear London is not the safe haven it used to be, Fathom said. Other risks analysed by the consultancy included a recapitalisation of the European banking system - although prices will likely hold steady in the face of such a scenario - and a Middle Eastern oil crisis, which would push prime London values down by 20 per cent.
A crash in the prime London market would be significant considering how far prices have risen in the last 60 years. Figures from Knight Frank show a high-end property in central London that was worth GBP10,000 in 1952 is likely to now be valued at GBP3.2 million, representing an increase of 33,000 per cent. Government and banking officials across Europe are working to prevent a eurozone collapse, or at least prepare for one if it should occur. Swiss National Bank chairman Thomas Jordan recently told the SonntagsZeitung newspaper his organisation is looking at ways to cope with a potential eurozone breakup, although he stressed that he did not think it would happen.
Despite his opinion, the European Commission's latest Economic Sentiment Indicator figures revealed a 2.7-point fall in confidence in the EU and a drop of 2.3 points in the eurozone for May, with the retail and industry suffering in particular - although consumer confidence was up in both regions.
- Friday 01 June 2012