When times were good the city banks paid millions and millions of Pounds in bonuses at the end of their financial years, and millions of the money was spent on lavish city property by the lucky bankers. There was gazumping, bidding wars and prices were pushed up in the capital, though they were rising at an alarming rate anyway.
One could’ve been forgiven for thinking that this effect would’ve been sorely missed this year, especially with the talk we heard of banks being banned from giving bonuses and the rows RBS had with the government over last year’s bonuses.
The last time the banks paid out big bonuses the property market was booming, and prices were going through the roof. Now most analysts are expecting a second dip in house prices. So the question is: will the type of hardcore investor who receives a multi-million Pound bonus, invest in an asset likely to fall in value within a year, given their expert knowledge?
It is entirely possible that London and UK property prices will endure a second dip, as unemployment continues to grow and the Pound begins to strengthen sending the foreign bargain hunters back home. But at the same time UK property, especially prime London property always grows over the long term, and the prices on prime city centre pads were growing as fast as or faster than any emerging market during the last boom. Of course many will buy simply as a status symbol to live in.
So the real question on the tongues of London property owners and potential sellers is over just exactly how much the government’s tough stance on bonuses was bravado. Will we see any lump sums paid out in cash, or will it be deferred shares and bonds?
Goldman Sachs has announced $5.4 dollars has been set aside for bonuses, while this week that Royal Bank of Scotland has set aside £1.8million for staff bonuses!
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