Record City Bonuses Send Houseprices Through The Roof

[Converted Lurker]

prices have apparently gone up by £18,500 which is a huge rise. Not sure how credible it is, but perhaps it gives more evidence that in some respects certain areas of London may be immune from a HPC?

http://firstrung.co.uk/articles.asp?pageid...articlekey=1330

[geranium]

It's not just the bonuses. The jobs market is booming in the City. In 2003, we all lived in fear of redundancy and 10% of us got the chop in the City. No wonder the City-dependent housing market was weak then. It didn't really pick up until the second half of 2005.

Then, everyone suddenly realised that M&A & trading revenues were booming, that headhunters were calling a lot more often and bonuses would be better than last year. The August interest rate cut was the trigger needed to get people buying again.

Now employment is back at an all-time high. It's as much about job security as about bonuses + more people working in the City and needing housing not far from it. Long hours mean it's best to live close to work, so a booming City means HPI in Docklands, City, Islington, Clerkenwell and London Bridge as well as rising rents.

I've no interest in saying this. I'm an STR struggling to get back in / trade up and I need to live near the City in a safe area because I'm standing at the bus-stop at 6.15 every morning.

The bonus money was more of a relevant factor for the older, higher earning people - who can afford to live further away because they have people doing the work for them. These people spent some of their dosh in Kensington, Richmond, Wandsworth & Kingston. I think most of them will have dealt though and it was interesting to see the Kensington MoM asking price in the Rightmove survey DROP in February.

I've been saying this for some time on this forum but I think the London figures are skewing the UK averages and it doesn't surprise me to read comments from posters outside London along the lines of "I don't believe the figures, the market's not going up, nothing's selling around here".

Edited February 23, 2006 by geranium

[beenhearingthisforyears]

It's not just the bonuses. The jobs market is booming in the City. In 2003, we all lived in fear of redundancy and 10% of us got the chop in the City. No wonder the City-dependent housing market was weak then. It didn't really pick up until the second half of 2005.

Then, everyone suddenly realised that M&A & trading revenues were booming, that headhunters were calling a lot more often and bonuses would be better than last year. The August interest rate cut was the trigger needed to get people buying again.

Now employment is back at an all-time high. It's as much about job security as about bonuses + more people working in the City and needing housing not far from it. Long hours mean it's best to live close to work, so a booming City means HPI in Docklands, City, Islington, Clerkenwell and London Bridge as well as rising rents.

I've no interest in saying this. I'm an STR struggling to get back in / trade up and I need to live near the City in a safe area because I'm standing at the bus-stop at 6.15 every morning.

The bonus money was more of a relevant factor for the older, higher earning people - who can afford to live further away because they have people doing the work for them. These people spent some of their dosh in Kensington, Richmond, Wandsworth & Kingston. I think most of them will have dealt though and it was interesting to see the Kensington MoM asking price in the Rightmove survey DROP in February.

I've been saying this for some time on this forum but I think the London figures are skewing the UK averages and it doesn't surprise me to read comments from posters outside London along the lines of "I don't believe the figures, the market's not going up, nothing's selling around here".

It is interesting to read your post b/c i have felt i was going crazy hearing from my friends in London (variety jobs from nurse to marketing director in City) all doing ok, and then reading the views on this forum. Could i ask what your views are on future prices in London?

Because even though FTB's should not have to buy in places like Walthamstow for example they are looking there, b/c you can get a starter home for £120k. And it is only 20 minute tube ride to Central London. Lots artist/students etc are moving there b/c they can no longer afford Bethnal Green.

Edited February 23, 2006 by beenhearingthisforyears

[geranium]

Assuming no major reversals of fortune in the markets and no interest rate rises, I think City-dependent areas of London could carry on rising. Sadly for me.

Of course, the City and its workers then support other areas of London's economy, so London as a whole might also rise.

I do think there's a limit to how much pent-up demand there is. It's already been and gone in Kensington, Kingston etc (just look at the Rightmove report). The good stuff is selling in City / Islington but anything over-optimistically priced (ie on the market with Foxtons) or in some way flawed is not moving. I think buyers still have a cautious mindset in London after a couple of years of having an I-can-take-it-or-leave-it attitude in a slow market.

The market does feel very toppy despite the basis of its rise.

Rents are rising, but if you do the sums, you'll find that it's cheaper to rent than buy, particularly if it's a flat you're looking at and your deposit is not that big.

I guess there are 3 components to the decision:

1. How does the rent compare to the interest-only payment on the mortgage - for the same property? Remember to add service charges or house maintenance onto the IO payments.

2. What would you rather do with your deposit and any spare cash: have it invested in 1 residential property or have it invested in cash or maybe take more risk with it in other asset classes eg. shares? Do you think property is going up by more than the net return on your deposit?

3. Lifestyle: do you need flexibility? Would you prefer to rent in a nice area than own in a less nice area? Or maybe you need to feel settled in a house that no-one can turf you out of?

I think it's useful to ask yourself the question: If I knew for sure that property will go up less than 3% pa, would I bother buying now?

Edited February 23, 2006 by geranium

[Realistbear]

prices have apparently gone up by £18,500 which is a huge rise. Not sure how credible it is, but perhaps it gives more evidence that in some respects certain areas of London may be immune from a HPC?

http://firstrung.co.uk/articles.asp?pageid...articlekey=1330

Poor old Tony Blair should have bought in the City then he would not be facing a massive loss on his house. Funny how some parts of London are dropping like a stone while others rise--at least according to the VIs. If they are relying on Rightmove data its a completely different story.

[geranium]

Poor old Tony Blair should have bought in the City then he would not be facing a massive loss on his house. Funny how some parts of London are dropping like a stone while others rise--at least according to the VIs. If they are relying on Rightmove data its a completely different story.

I've often wondered, why did he sell his Islington house? He really must have believed in the "no more boom & bust" mantra. Maybe HPI was a horrible accident, that just happened to keep Labour in power despite the bad feeling about War in Iraq.

[newbie]

I presume that the bonuses in the 80s must have been historically unparalleled and yet that didn't hold up the last crash.

I doubt if much of the money goes into the UK property market. I bet the vast majority is paid outside the UK under split contracts to avoid tax and National Insurance.

The people getting the big bonuses would generally already be homeowners. The biggest ones would go the tail end of the baby boomers.

They'd also be sophisticated enough not to plough their money into an overvalued market that's fairly risky but not promising decent returns.

It would be interesting to see a bonuses vs house prices graph. I wouldn't be surprised if there is not a lot of correlation.

Edited February 23, 2006 by newbie

[Jimmy James]

It's important to distinguish between the Palentine Hill areas (Kensington, Chelsea etc..) and the rest of London.

The former are always fairly bomb proof - although I doubt the overall percentage of inflows from total city bonuses is that high in proportion to other investments, by definition city boys should know a bad buy when they see it.

However for the rest of London ... the January (i thinK) Nationwide report noted that affordability issues for FTBs were more constrained than for any other area in the UK - 66% of take home pay on mortgage repayments and 7.5 times average FTB income. No matter how much froth you hear about a wall of city money this is the most important factor for the majority of London. It can't keep that high - it simply isn't sustainable.

[Gavin]

Sorry I still think there is a loit of bunkem talked about bonuses. Its the kind of unknwon that plays right into the VIs hands.

I work for a smallish company in the city with 120 staff that has just made record profits. Of those 120 I would put around 20 or less of them on decent bonuses.

The remainder are support staff, IT, secretaries, operations staff. Sorry I just can't see them getting life changing amounts. I agree that its the high earners who get the high bonuses. They are already homeowners. Which may keep the bubble inflated at the current level but it wont do didly squat for the FTB market which is the base of this damn silly ladder we hear about.

If you get Bricks and Mortar tomorrow and see how many flats are aggressively for sale in London I would say the bonus issue is swamped.

I just think its spin.

[Foobar]

Employees at Dresdner aren't smiling, it amazes me how record profits are made and yet they lay people off and cut back, maybe it's part of the cycle? When they hit a peak they know it's time to hack? ...

http://www.msnbc.msn.com/id/11463988/