Savills downgrades extent of Prime London bonus boom

Published 18th Jan 2011

The UK's residential property market is set to benefit from a £1 billion injection of bonus cash over the next few months, the majority of which will be invested in prime central London, analysis from Savills suggests. Additional deferred bonus payments may also find their way into the property markets, they say, but that will depend on how the private banks choose to treat them as collateral.

"We expect to see bonus money coming into the prime London market early next year, though not to the extent that it triggers a measurable price rise as seen in the past," says Yolande Barnes, head of Savills residential research. "Rather, we anticipate that bonus money will be fed into the market over a longer time period than has been the case in the past, with a less pronounced effect on the spring market than the big bonus headline figures may suggest."

Forecasts from the Centre for Economic and Business Research (CEBR) suggest that bonuses in the London financial services sector this season will total £7 billion. This is just five per cent down on last year, but down 13% net of tax and some 45% less than the 2007 bonus pot which helped propel the market to its peak in September of that year.

"We have factored a bonus effect into our forecasts for next year and anticipate the prime London market performing well ahead of the rest of the UK as a result," says Barnes. "However, general caution and the method and timing of the payouts mean that only a portion will be invested in property. The £1 billion boost will mean that any falls in prime London will be contained at a marginal -1.0% level, compared to a -3.0% fall anticipated for the UK as a whole."

Source: ' TMC '

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