London Bankers Property Relapse

Estate agents are predicting a wave of instructions to sell homes in London from bankers looking to leave the UK in the wake of the new bonus “super-tax”.

Ed Mead, director of the estate agency Douglas & Gordon, said that the single biggest topic of discussion among his finance-based clients was when they can get out and when it would make most sense to do so.

“I have had two very colourful hedge fund partners, both getting me round to look at their large and architecturally unusual houses and talking explicitly about selling because of what is happening. Both were willing to sell for a bit less than they might have liked to ‘get in ahead of the rush’ as they put it, even though they are not directly affected by the tax.”

One banker, a client of the mortgage broker John Charcol, recently relocated to Geneva as a direct response to Labour’s stance on taxation. He said: “Geneva is far closer to my ski chalet and my villa in Provence, and I reduce my carbon footprint by taking fewer flights. I’m struggling to find a downside and probably need to thank Darling for given me the reason for relocating; without him I would probably never have done it.”

Trevor Abrahmsohn, head of the agency Glentree International, said: “I have seen a number of people I know – who are all staunch British entrepreneurs – going to Monte Carlo, Geneva and Zurich. The real estate agents in these places are having a field day. People are worried about where it will stop.”

Savills, the property consultancy, estimates that buyers from the financial and business services sector account for about half of total demand in the prime London markets. It said the strength of demand from “bonus buyers” was reflected in the fact that those employed in financial investment markets accounted for 33 per cent of all cash buyers on average.

While some agents report that buyers are having second thoughts if they are relying on a bonus payment next year, the impact is expected to be limited owing to the already pessimistic view on bonuses. Demand for prime housing is also seen as more broad, particularly given the prevalence of overseas buyers.

Lindsay Cuthill, of Savills, was showing homes to a banker subject to the bonus tax yesterday. “As yet he is unsure how this will impact – but he was still out there and still likely to make an offer on a house at £2.25m,” she said.

James Hyman, partner for residential sales at Cluttons, the property consultants, said: “It is a little bit early to tell what the impact of the bank bonus tax will be on buyers; however, we are already noticing that vendors are now taking a second look at any offers which may have been slightly below the asking price as the anticipation of selling at a premium to bonus buyers is less likely.”

There are still fears that the nascent recovery in the prime London market could be impacted by the pre-Budget proposals. Mr Hyman said: “The changes to banks bonuses will have severe repercussions for the property market. This could greatly reduce the liquidity in the bonus market and leave many bankers . . with a potential shortfall in earnings.”

Copyright The Financial Times Limited 2009