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Boom at the top

Sophie Brodie

Wednesday, 23rd April 2008

Sophie Brodie finds that the high end of the market is holding firm

While there has as yet been no mass exodus of other communities to tax-friendly places like Geneva, the prevailing expectation is that many of those who might have come will reconsider. As a result, they won’t need a London base. Moreover, the niche £10 million-plus market cannot remain immune for ever. Its prices surged to record levels partly on the back of a ‘rising tide’ of eye-watering hedge fund and City bonuses that jumped in 2005 and have artificially inflated the London and country markets ever since.

Now that bonuses have dried up, the whole market must eventually subside. Last year’s stellar price growth in London property above £5 million has already faltered and country manor prices have fallen 0.4 per cent. One country agent admits, ‘Deals are being done but people are taking more time to make decisions.’

A few million pounds down in Bankerville, price falls have been more immediate. These fellows, who take home less than a couple of million a year, need debt. And there just isn’t much about. They also require employment, also on the wane with almost 30,000 City jobs expected to go over the next few months. Prices in the £1 million to £2 million bracket fell 2.7 per cent in the first three months of this year. They are expected to fall another 10 per cent by this summer.

Even those lucky enough to earn a bonus this year won’t be guaranteed a mortgage. Banks want proof that they’ll receive that amount every year — which rather misses the point of a bonus scheme.

So instead of a new house in Kensington, a Caribbean holiday and a bigger car, bankers will now have to stay in Fulham or Clapham and put money aside for school fees. It’s hard to feel too sorry for them, except that their loss of earning power affects us all.

By a happy accident, I live in one of the smarter parts of town, enabling me to observe the decline at first hand. My mailbox used to be full of invitations to sell, now I just get the odd request to rent.