Job losses and bonus cuts, will London house prices fall?

By November 10, 2008Articles

Job losses and bonus cuts will impact on London house prices.

Large-scale City job losses and cuts in remuneration will add to downward pressures on London house prices, says Capital Economics.

The research firm said the slowdown in the global economy and sharp falls in equity markets had dented demand for property at the top end of London’s housing market, which was previously a strong support for London house price growth.

Property analyst Seema Shah said Capital Economics was expecting job cuts in the City to reach 50,000 by the end of next year and, on average, bonuses to fall by 50% – taking the average City remuneration package from £90,000 to £70,000.

“This would imply a fall in aggregate City incomes of around 40% and an 8% fall in incomes in London as a whole,” she said.

“However, as house price valuations look less stretched in London than in many other UK regions, we expect house prices in London to fall by a cumulative 30%, compared to 35% for the UK as a whole.”

Shah said although changes to City employment did not on their own have a large identifiable impact on London’s housing market, when prices are severely overvalued, pay is falling and the wider economy is impacting negatively on house prices, a downturn in the City job market exacerbates busts.

10.11.08 – egi.co.uk

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  • admin says:

    Valuers on the ground do not see core London house prices falling by 30%, only the most pessimistic believe that. Properties that will and have fallen heavily are new build flats and homes surrounded by green space where further development can dilute the properties around them. Properties that are not inherently scare. Good London properties are scare by nature. Another category to be hit are those houses and flats which were being marketed far beyond their ‘real’ value back in summer 2007. There were properties on the market by unmotivated sellers, landlords with multiple homes that had all increased dramatically in value. Their theory was, if someone buys at this ridiculous high price, great… I’ll sell! We have often seen such properties touted as the example ‘proving’ wild accusations of 30% falls in London. We would like to see more real data of multiple properties which were properly marketed and sold ‘at arms length’ in say August 2007 and the same property sold now. Has it really dropped 30% ? Do people have real examples of actual 30% drops in value that are not new builds and are scare commodities within Zone 1, 2 and 3 of London?

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