Job losses in financial sector weigh down London prices

Shortage of homes will avert an all-out collapse in the City

Job losses in London's financial services sector are driving down property prices, experts say. Institutions in the City of London have axed 2,500 staff since the start of the year, because of the credit crunch.

Global information services company Experian warns that up to 20,000 City jobs may go this year - 5 per cent of the financial sector's 400,000 workforce. Recruitment has slumped from last year's record levels. City bonus payments are expected to fall this year.

David Salvi, director of estate agency Hurford Salvi Carr, said central London had 30 per cent fewer buyers in the first quarter of this year compared with the same period last year. '[Job losses] confirm the reality for London of the current banking crisis and the turbulent stock market which leads to wider instability.'

Lucian Cook, director of Savills Research, said prime central London property prices fell 2 per cent in the final quarter of last year, partly because there were fewer City of London buyers. Kensington, Chelsea, Knightsbridge, Mayfair and Belgravia are the districts traditionally targeted by bankers, traders and hedge fund managers.

The new GBP30,000 (HK$470,000) tax on non-domiciled foreign residents meant fewer overseas businessmen and professionals would buy in the British capital, Mr Cook said. 'The city's employment and bonus expectations will together with the reaction of non-doms determine how the prime London property market fares in 2008. We expect small falls in values in the first half of the year.

'The key question is how these two issues will affect demand in the back end of the year.'