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I think you grossly underestimate the importance of the financial sector for London's economy. I've been watching the IT jobs market there for a long time. My e

I think you grossly underestimate the importance of the financial sector for London's economy. I've been watching the IT jobs market there for a long time. My estimate is that at least half of all IT jobs are directly or indirectly related to finance. I'm sure it's even more extreme in legal and some professional services. Property prices do not simply depend on the number of people looking to buy. They are also determined by how much people are willing and able to pay. If you strip out the inflated salaries they pay in finance, it's going to trickle down to all other salaries and prices. The financial sector employs large numbers of foreigners. If they leave, demand gets crushed. Also, let's not forget that London property isn't just bought to live in. It's also an investment for rich people from all around the world. If finance moves on, these investors will follow suit.

twic 13y ago
It'd be useful to get some hard numbers on how many jobs in the other industries are dependent on finance. And, conversely, how many jobs in finance are sustained by the other industries, rather than simply being part of the edifice of international capital. FWIW, my estimate would be that less than half of tech jobs in London are in finance, but without hard numbers, we're just making things up, really. I'm not sure about trickle-down effects. These highly-paid finance people are not competing for the two-bedroom flats in Seven Sisters that i and other more ordinary middle-class people are after, are they? They're looking rather further upmarket. So, their demand drives a high prices of nice flats in Greenwich or townhouses in Chelsea or whatever. If that demand goes away, prices of those will fall. Then, some people who are currently looking at flats in Seven Sisters may switch to looking at these cheaper houses in Chelsea (choosing a barely affordable place somewhere nice, rather than a cheap place somewhere not so nice). That will reduce demand in Seven Sisters, and should let prices fall. But the degree of fall isn't related to the prices that the finance people were paying in Chelsea, it's just a function of the number of people who shift their attention out of Seven Sisters. I would expect the effect on prices in Seven Sisters to be muted. As opposed to, say, a collapse in the publishing industry, or the government getting serious about moving the civil service to the frozen Northern wastes, which would directly reduce demand in the middle of the market. The point about international investors doesn't make any sense to me. People don't invest in the London property market because this is where the financial industry is, they invest because it's a safe investment with a good return. The only connection to the financial industry is indirectly, via demand. And since my belief is that a substantial decline in the financial industry would not reduce demand very much, i also believe that such a decline would not cause a flight of investors.

twic 13y ago

It'd be useful to get some hard numbers on how many jobs in the other industries are dependent on finance. And, conversely, how many jobs in finance are sustained by the other industries, rather than simply being part of the edifice of international capital. FWIW, my estimate would be that less than half of tech jobs in London are in finance, but without hard numbers, we're just making things up, really. I'm not sure about trickle-down effects. These highly-paid finance people are not competing for the two-bedroom flats in Seven Sisters that i and other more ordinary middle-class people are after, are they? They're looking rather further upmarket. So, their demand drives a high prices of nice flats in Greenwich or townhouses in Chelsea or whatever. If that demand goes away, prices of those will fall. Then, some people who are currently looking at flats in Seven Sisters may switch to looking at these cheaper houses in Chelsea (choosing a barely affordable place somewhere nice, rather than a cheap place somewhere not so nice). That will reduce demand in Seven Sisters, and should let prices fall. But the degree of fall isn't related to the prices that the finance people were paying in Chelsea, it's just a function of the number of people who shift their attention out of Seven Sisters. I would expect the effect on prices in Seven Sisters to be muted. As opposed to, say, a collapse in the publishing industry, or the government getting serious about moving the civil service to the frozen Northern wastes, which would directly reduce demand in the middle of the market. The point about international investors doesn't make any sense to me. People don't invest in the London property market because this is where the financial industry is, they invest because it's a safe investment with a good return. The only connection to the financial industry is indirectly, via demand. And since my belief is that a substantial decline in the financial industry would not reduce demand very much, i also believe that such a decline would not cause a flight of investors.