The latest reports on the London housing market are of massively increasing demand fuelled by bonus fever. Not by people spending their bonuses, but of people buying houses in advance of the bonuses they will receive.
The Times ran an article on Monday past on how Prime London properties (£1m plus) in "bankers enclaves" are selling for prices in excess of prices seen at the peak of the boom in 2007, as banker's enter sealed bidding wars with each other and wealthy foreigners for the best properties. The reports are coming from Knight Frank, the global estate agency with a vested interest in London's prime market.
Have we learnt nothing? If we have seen the last of price drops in the UK it is only just and by extreme luck, because houses are still grossly overvalued according to impartial analysis, and still mostly unaffordable to the largest demand base of first time buyers. But we are all quick to jump and shout about how brilliant it is that these houses are selling for £5m+.
There is very little to justify these houses to hold such a value, having been worth less than a million only a few years ago. Their price is being determined by the wealth of London bankers rather than the value of the property and such cycles are only ever going to lead us into more crashes.
The bank's quick return to such huge bonuses has sparked anger in the press and the government. There is even talk of a windfall tax on the big banks.
Something like a windfall tax is the only way to stop the banks from giving out such huge payments, because the banks have to be competitive about what they pay the best investors, or face losing them.
The government stopped RBS from giving bonuses last year, and they lost staff. Trouble is they started offering multi-million Pound payments to lure the best bankers to come and work for them instead. If a windfall tax is levied on all banks then it would even the playing field and stop bonuses equally across all banks.
However, the financial services sector accounts for about 15% of UK GDP, and the government will not want to damage it too much either. We will find out in the pre-budget speech, due in the next few weeks.
I just wish that something could be done to regulate house prices at the same time. But should the prices of lavish properties in such areas really be regulated? How do you regulate a sought after property? If multiple wealthy buyers want the same property it is always going to mean a bidding war. We can't ask the seller to toss a coin. No, it does look like regulating the banking industry is where my anger will have to be channelled after all.
Across the rest of the market, demand is currently increasing. Today the British bankers Association revealed another rise in mortgage lending in September. Again it was massively higher than September last year, but lower than the peak in 2007. None the less, people are getting good prices for their homes at the moment. If you want to sell your house you can do so with Zungalow for just £29 per year.
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