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