Nov. 14 (Bloomberg) -- Luxury home prices in London will fall by 14 percent next year as bankers and hedge fund managers trade home shopping for job hunting.

Job cuts and potential layoffs at financial institutions will likely sap demand so much this year and next that the total two-year decline in luxury values may be 30 percent, real estate adviser Savills Plc said in a report today. In April, Savills had forecast a 25 percent decline for the period.

``We're not expecting any bonus money to go into the market this year and next,'' Savills research director Lucian Cook said in an interview in London. ``Any recovery is not going to be fueled by the central financial hub.''

London may lose as many as 62,000 financial jobs by the end of 2009, the Centre for Economics and Business Research said last month, while bonuses this year may drop by 60 percent to 3.6 billion pounds. Global financial institutions are grappling with more than $700 billion in mortgage-related losses and writedowns and a slowdown in economies worldwide.

Prices for prime apartments and houses costing about 1 million pounds or more ($1.5 million) are forecast to depreciate by about 20 percent this year and will probably fall by more than the U.K. market, Savills said. That reflects the slump in demand from the 300,000 people employed in financial services as companies eliminate jobs and reduce bonuses.

Banking and financial companies in London account for about a fifth of the city's economy and employ 7 percent of the workforce. London's finance industry contributed more than 4 percent to the U.K.'s 1.3 trillion-pound economy, research firm Oxford Economics estimates.

2010 Recovery?

Luxury prices will probably start to recover in 2010, when they will gain 6 percent, Savills said. The owner of a home worth 1 million pounds at the end of 2007 will probably have to wait until 2013 before values return to what they were six years earlier, the company said.

``Super prime'' homes worth more than 10 million pounds have also been affected by the slide in values, particularly amid the turmoil in the financial markets that led to the collapse in September of Lehman Brothers Holdings Inc. in the largest bankruptcy in U.S. history.

Richard Cutt, the head of Knight Frank's Mayfair agency, said he sold a newly modernized, 7,321 square foot house near Grosvenor Square last month to a Middle East buyer for 15 million pounds. The property, in a location favored by international buyers, was originally listed for 20 million pounds, he said.

Exploiting `Bottom'

``Overseas buyers will be looking to exploit the bottom of the market and the weak pound, kick-starting the recovery,'' said Yolande Barnes, Savills' co-head of residential research.

The pound has depreciated by 25 percent against the dollar this year, making London property attractive for international investors notably from the Middle East and South East Asia, she said.

Prime London home prices will probably rise by 15 percent in 2011 and by 10 percent in 2012, Barnes added.

The broader U.K. market will take longer to recover as the recession and difficulties obtaining mortgages curb demand. South East England, Scotland, East Anglia and London will recover first, in either 2012 or 2013, Savills estimates.

In contrast to London, New York's high-end market hasn't seen prices fall on a year over year basis. In Manhattan, the most expensive urban market in the U.S., the median price for co-operative apartments and condominiums rose by 2 percent to just over $4 million in the third quarter, according to data from the appraisal firm Miller Samuel Inc.

The average price per square foot was $2,075 in the third quarter for properties costing at least $2.77 million. The most expensive new condominiums sold for more than $6,000 a square foot, New York-based Miller Samuel said.

To contact the reporter on this story: Simon Packard in London at packard@bloomberg.net

Last Updated: November 14, 2008 07:01 EST