Its report, In a Class of its Own? said that property prices in the capital’s most sought-after postcodes have been driven up by foreign investors who have viewed London as a ‘safe haven’.
The report found that since 1995, safe-haven flows have boosted the price of prime central London relative to the rest of the UK by just over 30%.
However, the research suggests that if the single currency zone fell apart, as a growing number of economists are now starting to predict, demand for London properties would start to drop.
Fathom said: “Although fears about a messy end to the euro debt crisis may account for much of the gain in prime central London prices that has taken place over the past two years, the break-up of the single currency area is perhaps the single greatest risk to London prices.
“In the worst-case scenario, we estimate that London prices could fall by 50% following a break-up of the single currency area.”
Last week, Citigroup’s top economist Michael Saunders forecast that Greece will exit Europe’s single currency on 1 January 2013..
Saunders based his views on the belief any Greek government formed from elections on 17 June will fail to implement the appropriate austerity measures.
A note to clients put the likelihood of Greece leaving the euro, or ‘Grexit’, in the next 12 to 24 months at between 50% to 75%.
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