The weakening in the sales market was mirrored in employment data for the City. In October 2010, The Centre for Economics and Business Research (CEBR) downgraded its earlier forecast of financial services jobs growth from 14,000 to 9,600 for 2010 and projected a rise of just 2,700 for 2011 in response to a hiring freeze reflecting an increasingly onerous regulatory environment and higher tax rates. Data on new job opportunities from recruitment consultant Morgan McKinley showed monthly figures declining from 6,048 in July 2010 to 4,725 in September, before increasing by 5% in October to 4,977. The firm’s overall comment was that the trend for hiring was lower in the third quarter compared to the first half of 2010.

City bonus levels were projected by CEBR to be £7 billion for 2010 compared to £11.6 billion in 2007. Higher tax rates, however, mean that the net figure is actually £3.8 billion. The structure of bonuses, which include share options, is such that we do not expect to see a significant injection of bonus money into the Midtown, City and Docklands housing markets, which was a significant factor in the market up to 2007. On a more positive note, the stock market performed strongly in the second half of 2010, with the FTSE 100 Index rising from a 4,806 point close on 1st July 2010 to 5,875 on 9th November 2010, an increase of 20% and its highest level since mid-2008.

The Index weakened, however, in November 2010 in response to the deepening crisis in the Irish economy with the Irish Government having to call in the IMF and EU to rescue the country’s banking system. There was concern that similar measures might need to be applied to other weak peripheral Eurozone economies such as Portugal, and even the zone’s fourth largest economy, Spain. Confidence was also affected by the 22nd November “fire-fight” between North and South Korea.

The overall impact of these external economic factors was to reduce the level of confidence in the housing market in Midtown, clerkenwell property market and Docklands resulting in a downward trend in new enquiries and in the number of sales agreed. Downward pressure on sales prices, however, was mitigated by limitations on the amount of stock on the market. Market conditions suggest that the level of stock for sale will continue to be constrained in 2011.