Bonus Slump Fueling Home-Price Drop in London's Banker Enclavesby
Home prices in London districts typically favored by bankers are falling as bonus payments drop and career promotions are delayed, according to a report compiled by Knight Frank LLP.
Values in Knightsbridge declined 6.8 percent in the year through March, while they were down 4.9 percent in South Kensington and 2.5 percent lower in Chelsea, the London-based broker said in a report Monday.
“In the old days we would see a pick-up in activity in the first two months of the year from bankers who had an idea what their bonus would be,” James Pace, head of Knight Frank’s Chelsea office, said in the report. “That has now completely disappeared.”
Sellers of luxury homes in the capital are cutting asking prices by more than ten percent as high valuations, subdued pay awards and falling commodity prices reduce demand. A survey by salary tracker Emolument.com of 2,500 employees at nine U.K. banks found that directors’ bonuses this year are down an average 33 percent, while vice presidents have seen theirs reduced by almost a quarter.
“The banking industry is finding a new normal and the heady days of old are, in most cases, a distant memory,” Nick Miller, head of corporate and institutional banking at executive recruitment company Odgers Berndtson, said in the Knight Frank report. “Bonuses are down 10 percent to 15 percent across the board and the criteria for getting them have become tougher. Promotions to managing director level are happening significantly later in people’s career.”
Across the capital, values for homes in the 15 districts defined as prime areas grew 0.8 percent in the year through March, the slowest annual pace increase since October 2009, the Knight Frank data show.
Sales volumes in March were higher than the same period last year, the broker said, as asking prices dropped and purchasers sought to complete deals before tax increases came into force in April.