There used to be a buzz at the start of each year, with property owners sprucing up their home, redecorating, replanting the gardens and window boxes, and estate agents rubbing their hands in anticipation for the hive of activity that was the spring market.
Traditionally the spring market was the best time to sell, with the greatest number of buyers looking and the highest prices achieved. Some would agree that this was because of the improved weather, the blossom on the trees and the longer days. In reality and especially in London, the increased activity also has a lot to do with city bonuses! Historically, many financial institutions told staff their bonuses in mid-February and whilst these weren’t paid until the end of the financial year, a spending spree would ensue from March onwards.
Whilst the banking industry continues its recovery following the collapse of Lehman Brothers in 2008, data shows that while the flow of deals is rising, there is no indication that bonuses will start to materially drive property demand in the immediate future. This is due to a pervading mood of market uncertainty as well as fundamental changes in the banking sector and I suspect primarily because of the way bonuses are now paid.
Pre the financial crash most bonuses were generous and normally paid in cash, today they are often paid in stock options.
“The banking industry is finding a new normal and the heady days of old are, in most cases, a distant memory,” said Nick Miller, head of corporate and institutional banking at executive recruitment company Odgers Berndtson. “Bonuses are down 10% to 15% across the board and the criteria for getting them have become tougher. Furthermore, promotions to managing director level are happening significantly later in people’s career.” The slowdown has also been magnified by banks reducing headcount and winding down fixed income, currencies and commodity operations, Miller added.
There has been little sign of any bonus activity this year and what spring market there has been was driven by the introduction of the SDLT 3% surcharge for second homes, which came into effect on 1st April 2016. I think that the flurry pre 1st April will be the full extent of this year’s spring market. It hasn’t been long since the deadline and there has been a notable change in activity levels. I suspect that this will still continue until after the London Mayoral Election and the EU Referendum results, regardless of how warm the weather might be in the coming months.