Bonus buyers return to the property market

City workers with bonuses have started spending their cash on upmarket properties in the capital again, as confidence over their future bonus stream grows.

Bonus buyers have entered the property market in higher numbers than last year, figures from property agents show, with people now more likely to upsize than splash out on high end trophy homes.

Bonus cash has been a less dominant force in the market since the financial crisis, after many banks introduced structured bonuses with payments staggered in shares and bonds rather than a lump cash sum.

But the number of buyers from the financial and business services sector over the past three months was up by 18 per cent compared to the same time last year, according to Savills, while in prime south-west London they rose 69 per cent.

According to Hamptons, the estate agent, at least a quarter of prime central London buyers are currently British.

“While the bonus buyer of today is much more discrete than in previous years, there is evidence that the majority of this money is coming from the City,” said Andrew Phillips, London director at Hamptons.

Current hotspots for bonus buyers are Kensington, Notting Hill and Wandsworth in the £2m to £5m range, as these locations are more affordable than Knightsbridge, which is dominated by wealthy overseas buyers.

Ed Mead of Douglas & Gordon said that waning political attention paid to bonuses had given City workers more encouragement to buy properties again. A returning appetite from private banks and high street lenders for large loans has also helped, said Nigel Bedford of Largemortgageloans.com.

More than half of the 650m shares awarded to Royal Bank of Scotland employees this week for their performance in 2009 were immediately sold into the market on Monday, creating what agents believe could be further bonus cash for the property market.

However, some agents believe it will be another few years before bonus buyers return in the same numbers as seen in 2007, when £5bn of bonus cash was invested in the property market. Savills is still forecasting £1bn of bonus cash to be invested this year, down from £2bn last year, in spite of the recent increase in numbers.