Julian Knight: Don't be surprised if the roof falls in on London's property boom

Money will flow out of the economy and Treasury coffers

Friday was what I call a top of the market sort of day. My voicemail messages included a lunch invite to a new restaurant opening (sort of invite I like), a breathless fund management firm telling me how great their last-minute individual savings account deals were and a PR explaining that his client had £100m to invest in central London residential property and would I like an interview?

It's the last one that struck home, because in a world of moribund returns and talk of currency and sovereign debt crisis, central London property is the investment de rigueur. You can't be considered truly rich unless you have a pad in Kensington, Chelsea, Mayfair and increasingly beyond as "central London" seems to be spreading ever outwards.

The overwhelming majority of buyers are foreign, Chinese, Russians, Middle Eastern and even a few Greeks (gambling on capital uplift when their own currency is eventually forced to abandon the euro). One estate agent I know told me of the 25 deals it has done this month – all have been in cash and from buyers outside the UK.

For locals this means central London is becoming a ghost town with residences mothballed.

It also means locals are priced out. One young couple I know who asked how much it would be to buy the shoebox, one-bedroom flat in Borough they were renting were told over half a million quid – and it's only recently Borough began to be considered "prime central London".

In short, we have a separate market in central London not related to domestic economic growth but tied into the global drive for possessing tangible assets.

But London surely cannot remain the investment de rigueur for much longer. More aggressive property taxes (which were announced in the Budget), social problems (such as a repeat of last year's riots) or investors deciding prices are too "toppy" and placing their money elsewhere is all it needs for the market to go pop.

But really, what does this matter to you and me who don't live in these prime central London areas? Well, money will flow out of the economy and Treasury coffers and the wash-out effect – where London price rises filter through north and west out of the capital – will not have time to take place.

The current boom is too rapid and unsustainable to help those in other parts of the UK lift out of negative equity. We may face all the negatives of a boom turning to bust but without any of the prior benefits.