Bankers and other employees in London’s financial industry are set to put down 3 billion pounds ($5.3 billion) of their 2005 bonuses as deposits on more than 20,000 new homes in the next two months, according to a report issued today.
The spending spree would finance almost 200,000 average-price homes, the Homebuyer Show said in the e-mailed report. The forecast expenditure equates to 40 percent of the record bonuses paid out to the 325,500 people working in the City of London and Canary Wharf, the U.K. capital’s two main financial districts.
“The payment of City bonuses can have such a dramatic effect on the market,” Property for Life spokesman Adam Woolley said in the statement. “In recent years, so much of this extra money has been invested in property that it has had a strong influence on the direction of the London market.”
The priciest homes in central London gained more in value last year than cheaper apartments and houses, with higher than usual transactions in November and December as buyers sought to pre-empt the impact of bonuses on the market, according to Knight Frank LLC, a London-based real-estate brokerage.
The forecast assumes a 10 percent deposit with the remainder financed by a mortgage, Homebuyer Show spokeswoman Liz Holloway said. That gives an average price of almost 1.5 million pounds for each property. The average U.K. home costs almost 172,000 pounds, HBOS Plc, the U.K.’s largest mortgage lender, said on Jan. 9.
Four of the five biggest Wall Street firms, including Goldman Sachs Group Inc. and Morgan Stanley, posted a combined record $14.6 billion in profit last year, an increase of 15 percent.
London paid out 7.5 billion pounds in bonuses for 2005, or 23,000 pounds a worker, the Centre for Economics and Business Research said on Jan. 12. Wall Street will pay out $21.5 billion in bonuses, New York State Comptroller Alan Hevesi said on Jan. 11.
Some of the bonuses will be spent on buying real estate overseas in countries such as Bulgaria, Spain, India and China, Nick Clark, chairman of the Homebuyer Show, which takes place in London’s Docklands district on March 16 to March 18, said in the statement.
“This is exactly the type of investment which can appeal to those City workers who are used to speculating on assets and deals in their professional lives,” Clark said.
Source: Bloomberg More on story from Financial Times