One Hyde Park in Knightsbridge has attracted attention from Greek investors

A new wave of cash is pouring into London’s housing market from the eurozone—most conspicuously from Greece, as Greeks face the possibility that they will wake one morning to find their fortunes reduced to wads of useless drachma.

Greeks have been moving money out of the country since the crisis began in October 2009, after the election of the Papandreou government revealed that budget figures presented to Brussels were a fantasy. According to Bloomberg, more than €28bn of cash has left since early 2010. In September, €5.4bn of deposits left the Greek banking system; in October, €8.6bn.

Knight Frank, one agency dealing with upmarket London property, said that over the past 12 months it was aware of Greeks buying more than £300m of London residential property. Other evidence suggests the total is far higher; one adviser said that in the past year Greeks had bought three flats in One Hyde Park, the dark glass block designed by Richard Rogers which now squats between Knightsbridge and the park, for £25-30m each. “There is lot of anecdotal evidence that the last couple of months have seen a big increase in interest from Greeks to invest in London property,” says Vicky Pryce, a former chief economist at the department for trade and industry, who is herself Greek. “This can be interpreted as losing faith in the Greek economy, but also in the euro more generally and wishing to safeguard the value of their euro holdings.”

Of course, Greeks are far from the only buyers. A Knight Frank spokesman said that in the year ending September 2011, foreign buyers invested £4.7bn in central London property, up from £3.95bn the previous year. But the Greek component is rising. A director of a Park Lane estate agency told Prospect that the flow of funds into London is large and continuous: “there is a substantial amount of Greek money finding its way into flats circa £6-7m,” he said.

Where is it all going? The preferred locations, unsurprisingly, are Mayfair and Knightsbridge, with buyers paying cash. One property portfolio manager told Prospect that wealthy Greeks, previously not often seen in the London market, are lining up to buy homes for £10m-plus. A spokesman for a central London translation agency that works closely with several law firms commented that it had recently seen “an increase in the interpretation services provided to Greeks in London.”

Alongside these new buyers, more familiar faces continue to invest. One property manager told Prospect that: “EFG and Latsis are constant purchasers of central London. Nothing has changed.” Eurobank EFG is one of Greece’s biggest banking groups. Spiro Latsis is a Greek multibillionaire, whose family owns a large portion of EFG and who has been a longstanding fixture in the London property market.

This should be good news for the top of London’s housing market. The banking crisis of 2008 left many properties at the top of the market languishing unviewed, but now, the portfolio manager said, Greek buyers are willing to pay top prices for London properties that “even the Russians haven’t bought.”

Yet while the influx of cash is certainly pushing up the central London market, one senior property analyst explained that this market is extremely small, and there is little trickle-down to other postcodes. As one top property lawyer  put it: “You would never get a Greek venturing beyond Hampstead, or Kensington.”

What is more, the acquisitions may not contribute much tax revenue, as top-of-the-market purchases are increasingly structured to avoid stamp duty. The most common method of evading payment is to create an offshore company that owns the property as its only asset; the company is then sold, not the property. A spokesman for the British tax authorities told Prospect that Her Majesty’s Revenue & Customs (HMRC) “is currently unable to insist or extract any SDLT [Stamp Duty Land Tax] payments from foreign companies as it does not have jurisdiction over foreign companies.” This practice is well known and widespread, although HMRC is in the process of beefing up its rules.

This accelerated flight of money is more bad news for Greece. In late November, George Provopoulos, the Governor of Greece’s central bank, told a parliamentary committee that the drain of bank deposits from the country was “very bad.” With the eurozone crisis far from resolved, more money will continue to flow out of Greece for quite some time, no doubt much of it to London. And while Greece suffers from that, it is not clear that Britain will greatly benefit.