For those that don't know, the European debt crisis has taken a turn for the worse again. Fresh fears over the need for a Spanish bailout and/or the possibility that the EU would disband because of its inability to give a bailout the size the Spain would require, have led to more volatility on the currency and stock markets, and more predictions about the impact on property.
One prediction that has made a lot of headlines is the prediction of UK developer Development Securities that the break up of the Euro could see London house prices fall by 50%. The prediction is based on a research report by Fathom Consulting as commissioned by Development Securities, which found that the complete break up of the Euro would first lead to a surge in prices as the search for safe-haven investments intensified, but once the break-up had taken place, demand for these assets as an insurance against this event would start to ebb.
"Although fears about a messy end to the Euro debt crisis may account for much of the gain in prime central London (PCL) prices that has taken place over the past two years, we find that a break-up of the single currency area is also the single greatest threat to PCL," said researchers.
"In our judgement, a collapse of the single currency area could ultimately produce a 50pc fall in the value of PCL property."
It stands to reason; investors are looking for safe-haven investments as a hedge against the volatility caused by the European debt crisis and the general uncertainty surrounding how bad the final outcome could be. But once it came to the crunch and that worst outcome was realised, there would be nothing to fear apart from what was there to see, and this could lead to waning demand for such safe-haven assets.
- Tuesday 05 June 2012