Bonus talk raises hopes of a buying spree in London

Estate agents are upbeat that City money will once again be ploughed into property, but commentators are not so sure

Estate agents in southern England are rubbing their hands in glee at the prospect of a GBP3billion ($40.55 billion) property spending spree by City bankers and traders this spring. But analysts are divided over whether this will have much impact on property prices.

City of London financial services staff will receive a record GBP7.5billion in bonuses at the end of this year, up 16 per cent on last year, according to the Centre for Economics and Business Research (CEBR).

The average bonus will be GBP23,000, but some reports indicate that about 3,000 people will receive a bonus of GBP1million or more.

Estate agents are upbeat because CEBR research shows that roughly half of bonuses end up in property. If GBP3billion was spent this way, that would be equivalent to the value of 200,000 average-priced British homes.

Property consultancy Knight Frank said this injection of cash would boost the property market.

'We have no doubt this money will go into property. We believe prime central London prices this year will grow by 7 per cent, well above our 2.5 per cent forecast for the whole of Britain,' Knight Frank head of residential research Liam Bailey said.