The bonus gap

22 Jan 2007 By Hugo Dixon

House prices in prime areas of London and NYC are booming compared to the UK or the US in general, driven by bankers bonuses. But London is pulling away from NYC. That s partly a reflection of its momentum as a financial centre. But the extra cost is also a worry.

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Residential housing prices in prime areas of London including Belgravia and Knightsbridge (SW1) and Chelsea and Kensington (SW3), grew 42% in the past three years on a price per square foot basis, according to real estate analyst Liam Bailey of Knight Frank. At the end of 2006, property in SW1 fetched £1450 a square foot and £1290 a square foot in SW3. Both represented a 29% increase over the course of the year.

Residential housing prices for luxury condos throughout Manhattan grew 35% during the same time period according to real estate appraiser Miller Samuel. In the last quarter of 2006, the average sale of a property for luxury Manhattan condos was $1712 a square foot, representing a 6.3% increase over the course of the year.

From 2004 the aggregate amount of bonuses handed out in the City rose 35% from £6.54bn to £8.8bn, according to the Centre for Economic and Business Research. Bonuses in Wall Street during the same period rose 26% from $18.6bn to $23.5bn, according to the New York state comptroller. Bonuses in 2006 were up 17% in the City and 9% on Wall Street.

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