May 30, 2012 / 11:03 PM / 5 years ago

Euro collapse could halve luxury London home prices

LONDON, May 31 (Reuters) - Prices of the best central London homes could halve if the euro zone breaks up, as the safe-haven appeal of sterling disappears and weaker European currencies give rise to bargains elsewhere, research showed.

An ensuing collapse in global equity prices would also force buyers to seek cheaper alternatives, the report from British developer Development Securities said.

Luxury London house prices have rocketed in recent years as economic turmoil in Europe and political uprisings across north Africa and the Middle East prompted investors to shield their wealth by buying property in the UK capital.

The price of such properties has risen 44 percent over the last three years, more than double the increase in the capital as a whole, property consultant Knight Frank said.

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

“However, the property industry knows, perhaps better than most, that nothing goes on forever.”

As Greece’s financial crisis deepens, governments and private companies are preparing for the eventuality of it leaving the single currency, and a complete break-up of the European bloc.

The report also showed nationals of eastern Europe and the former Soviet republics bought the most expensive London homes, paying 6.2 million pounds ($9.7 million) on average, followed by Middle Eastern buyers who paid an average of 4 million pounds.

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