The vote for Brexit may be the pin to burst the property bubble in London, according to analysts at French investment bank Société Générale – sending the city's house prices crashing by as much as 50% in the most expensive areas.

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Britain's economic outlook has worsened since the prospect of Brexit became a reality with some economists predicting the country will slip into recession as investment is delayed, diminished and withdrawn amid the uncertainty.

Job losses anticipated in the financial sector if the Brexit negotiations do not go in the UK's favour will hamper demand in London's prime property market as fewer top-level executives come to the country to work, said Société Générale.

The research note cited that London house prices are 12 times average earnings in the city against a long-term average of six times. Moreover, average new buyers now pay out 40% of their income on servicing their mortgages compared with the long-term average of 34%.

"A simplistic 'back of the envelope' computation shows there were 3,140 real estate transactions registered above £2m in London in 2015 (and 920 in 2016 leading up to Brexit)," said a statement from Société Générale. "If we assume 500 managers from twenty firms relocate outside the UK (so as to retain access to the single market), of which one-third of those households are 'forced-sellers', we end up with a potential volume of transactions of 1-2 years that prime segment.

"Given the current ratio of prices to incomes in London, a price correction of even 40-50% in the most expensive London boroughs does not seem impossible... we see a classic housing bubble in London and Brexit as the trigger for the correction."

Sterling's collapse after the 23 June 2016 referendum is being touted by some in the property market as a reason to invest in London because it offers a discount to US dollar buyers in particular, helping to offset the cost of recent tax rises on investors.

"It would not make sense for investors to keep buying if the sterling continues to decline, as it also decreases the value of their assets," said Société Générale. "Overall, the decision to buy depends on the buyer's frame of mind: how bad they think Brexit will impact the UK and whether they consider London property to still be a safe haven?"

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