Insight into what properties bankers and financiers are buying in London

There has been much speak and speculation about the effect the headline grabbing £14bn bonus figures paid in the last financial year will have on the property market, but it’s important to look at these figures more closely, according to London property search company, Sourcing Property, who act for a number of banking clients.

‘Over recent years, smaller proportions of bonuses have been paid in cash, typically, approximately one third of the bonus amount is cash, and that’s after tax,’ stated Jo Eccles, Director of Sourcing Property.

She gives as an example; from a £1 million bonus, £500,000 will be taken in tax, and usually, two thirds will be paid in shares, so the actual cash sum will be approximately £166,000. The two thirds paid in shares can generally only be cashed in over a three year period and some banks are increasing this to five years, meaning that people don’t tend to receive large one off lump sums anymore.

‘With European and UK bank shares depressed, the banker clients we’re representing aren’t cashing in their vested shares to purchase property, as they don’t want to realise those losses. One of our Credit Suisse clients, for example, is sitting on quite a lot of stock but has opted to purchase a more modest property, as Credit Suisse shares are down 17% this year and he’d rather hold on to them in the hope of them rising, rather than cashing in at the current low level. This decision is quite common with other banking clients of ours,’ Eccles explained.

Whilst bankers and city clients are still prominent in the market place, approximately 60% of Sourcing Property’s clients are in the financial sector, they are being cautious, with another wave of redundancies happening at the moment. For example, Goldman Sachs is slicing approximately 10% of its global workforce.

‘Many of our city buyers are being sensible and focusing on buying good quality properties which would be simple to liquidate if they need to. We shouldn’t forget that banks are still being strict with their lending criteria too, so those who aren’t buying property with cash are still finding it hard to secure finance, even if they are in a stable, well paid job,’ stated Eccles.

‘One of our JP Morgan clients recently complained that even though she is in the top 1% of earners in the UK, she’s still seen as high risk by estate agents and sellers as she’s not paying 100% cash, which so many overseas buyers are,’ she added.

She has an insight into who is buying at the moment. Budgets tend to be approximately £900,000 to £1.3 million for a two bedroom, two bathroom flat. Banking clients at this level are typically those who have been renting and haven’t yet purchased anywhere, so they’re purchasing at a much higher level than the average first time buyer. They tend to be in their early thirties,…

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Submited at Tuesday, August 23rd, 2011 at 2:00 pm on News by alliana
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