UK Luxury Property Prices Might fall Further

UK property brokers, Savills and Knight Frank in particular, claim that the recovery of the market of luxury London houses might be hampered if British banks proceed with the initiative on curbing banking bonuses. According to the brokers, bank employees are among those borrowers who can afford big mortgages for purchases of expensive properties. The London market of luxury houses has just started to see people buying properties after a year of stagnation caused by the economic downturn. Now, in case banks stop paying bonuses to bankers and financial-services employees, this property sector is highly likely to degrade again. Bailey experts say that house prices for luxury properties will either decline again or will take much longer to recover if bankers’ bonuses are curbed. This view is shared by Savills and Knight Frank – UK estate agents that account for the majority of UK luxury house and apartment sales. House prices for luxury properties started to increase in April 2009 and gained as much as 1.3% in September. However, Savills experts are determined that the improvements in this property sector are mainly caused by a limited number of properties for sale, which is 25% less than a 5-year average. Moreover, the number of bankers and finance-services employees, who are believed to be the top buyers of luxury properties, fell to 32% in the past 6 months from 40% in 2007. However, it saw a 2% increase from the beginning of the year. Let us remind that the limits on bonuses for workers were agreed 3 days ago by 5 major UK banks. This initiative followed the meeting of G20, held last week in Pittsburg. Limits on banks’ bonuses are expected to influence luxury house prices in expensive areas as Mayfair and Chelsea as badly as job cuts by major financial companies did.