Eurozone Crisis Threatens UK House Prices

The theory is that the value of Stirling would rise steeply against other European currencies, deterring foreign investors from buying in the UK.

With a fall in demand, prices would eventually have to come down in order to compete with the lower prices of property in other European countries.

In the last few years, foreign investors have been keen to invest in the London housing market, seeing the UK as a far safer bet than the riskier economies of countries such as Greece and Spain, which have struggled to remain solvent during the global financial downturn. Experts have referred to this phenomenon as "safe haven" investment.

Development Securities chief executive Michael Marx elaborated that investors from countries such as Russia, China and Singapore were responsible in particular for the continued buoyancy of house prices in central London in recent times. He said: "Investors globally who were looking at the euro as a place where their money would be safe are now thinking there would be some jeopardy and are looking to invest outside the euro."

Popularity in London's most prestigious postcodes, such as Chelsea, St John's Wood, Kensington, Notting Hill, South Kensington, Belgravia, Westminster and Mayfair, has seen average property prices stand at £1.2 million - six times the average national house price. This indicates that despite the double-dip recession, property in London has remained in demand. In fact, the value in these areas rose 30% faster than in other areas of London and 34% faster than in the rest of the UK.

60% of properties sold in these premium areas have gone to some of the world's wealthiest investors, demonstrating that were they to be priced out of UK property investment, finding cheaper and more desirable alternatives abroad, there could be a devastating effect on our housing market.

As Michael Marx continued, "There's a global impact when the euro is in the crisis that it is in, it's not just limited to eurozone countries."

A large proportion of global investors target central London specifically and would never consider investing in other parts of the country. Perhaps now, though, the time is right for them to begin to look to some of our other cities and towns, where house prices remain favourable.

In the North West, lifestyle magazine Manchester Confidential found that UK-based investors are looking increasingly towards the North West as a potential area for investment since the arrival of the BBC at MediaCity in Salford Quays, a controversial move that has seen many large BBC departments move out of London.

If the London housing market in particular threatens to burst, then, because of such sky-high prices set against a precarious background of an unstable Eurozone, these big international investors might just follow suit and demand could continue to grow in the North West, strengthening the housing market at this end of the country.

So the threat to UK house prices posed by the Eurozone crisis might not all be bad news - it just might mean a shift from a predominantly London-centric focus to a more national one, which may, in fact, be positive for areas of the country that have struggled in terms of sales in recent years.