There has been a flurry of activity in the UK property market over the last two weeks. The surge was fuelled by bankers, who have just received their hefty cash bonuses.
An increase in these so-called ‘bonus-buyers’ – cash-rich bankers who are in a position to speedily proceed with purchases – has forced other homebuyers to move quickly to find and secure properties for purchase. According to research carried out by property consultants ‘Cluttons’, there has been increased market competition since the start of banker bonus season.
The research coincides with a report from the IFA which revealed that billions of pounds of banker bonuses may have been paid out ‘by mistake’ due to miscalculations caused by Britain’s flawed accounting rules. The House of Lords Economic Affairs Committee, which has been investigating the role of auditors in the financial crisis, has been told that the controversial International Financial Accounting Standards (IFRS) allowed banks to hide risks so that profits and bonuses could be inflated, the Telegraph reports.
Iain Richards, of Aviva Investors, told the Lords that the IFRS system of auditing the banks had "a material cost to the taxpayer and to shareholders" because "as a result, dividend distributions have been made and bonuses have been paid that were imprudent.”
James Hyman, Partner for Residential Sales at property consultants Cluttons, said: "It looks like big bonuses will be paid this year despite the Government's failed attempts to intervene in the case of the state-owned banks. Bankers are already starting to look for property ahead of their bonuses being paid, and buyers know it will only be a few weeks before this cash starts flooding into the market, creating fiercer competition and forcing sales to sealed bids.
"The first quarter of this year will offer the best window of opportunity for sellers, as buyers spending upwards of £1million will be keen to avoid the additional 1 per cent rise in stamp duty tax coming into force in April, which will take their stamp duty bill to 5 per cent. The limited amount of property for sale also presents excellent opportunities for sellers over the next few months."
Bridging lenders may well be pleased with the current market situation, as these ‘rushed’ buyers are often in need of cash at a time when high street banks are lending restrictively. Alan Margolis, Head of Bridging Finance at United Trust Bank and property specialist, said: "The flurry of activity might present opportunities for some bridging lenders to assist these fortunate individuals with their property purchases. However, such people are usually very rate-sensitive and any bridging loans will have to be keenly priced."
When asked for his comment, Richard Deacon of Masthaven bridging finance, said: “Bankers bonuses - whether we like it or not - are here to stay. The billions of pounds paid out annually to the city high flyers are the highlight of the January financial press. You either admire these guys for doing so well to earn such vast sums, or you see them as a drain on a society in which the majority of the money would be best spent elsewhere.
“Still, they do get the money, and they do spend it. These guys have upwards of a million quid burning a hole in their Saville Row suit trouser pocket, but they are generally shrewd enough to buy sensibly and profitably in emerging markets as opposed to a fashionable or trendy area. In these times of slow movement in many postcode areas, this influx of heavy cash buyers will surely have an effect, but the amount of the super high earners is not so vast that it could move the market in the volumes that is suggested in some quarters.”
By Frank Burbage
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