Fears are beginning to grow that the UK property market could follow its counterpart across the Atlantic into a dramatic downturn that could threaten the livelihoods of householders and investors.
With prices having been artificially buoyed by the runaway wages in the City, overvaluation of property has become a norm in London and other areas with a strong financial sector.
But one clear effect of the credit crunch spawned by the collapse of the US sub-prime mortgage sector is likely to be that the established institution of massive bonuses for financial workers is set to be much toned down.
A study by the Centre for Economics and Business Research (CEBR) found that the yearly bonus for financial services workers will be around 16 per cent down on last year at a total of £7.4 billion.
Although the payout in 2006 was a record of £8.8 billion, the drop is expected to lead to a lower demand for high-end property purchases.
When this drop is coupled with a predicted 6,500 job losses in the square mile, it may come as no surprise that the CEBR predicts that the problems in Britain's premier financial centre will lead to a cooling of the property market in the capital.
Estate agents Knight Frank found that the former strength of the market is struggling to hold up price growth even in the most exclusive areas of Mayfair, Belgravia and Knightbridge.
While year-on-year growth in these districts is still up 36.5 per cent, the squeeze on the world's financial markets has prompted a rapid slowdown to a price increase of just 1.2 per cent in September.
This continued the recent trend of smaller and smaller rises, progressing from 3.9 per cent in July, to 2.1 per cent in August and then hitting the most recent price rise level.
Unfortunately for the rest of the country, the London markets will not be alone in feeling the impact of the credit crisis as buyers' faith in the ever-rising price of property has been shaken.
Paul Airey, a chartered surveyor in Sunderland, told the Guardian of his fears that the wider population may have come to the belief that the entire property market is over-valued.
"There is definite cooling, I think the market is over," he said. "Prices have already fallen by about 2-3 per cent in the last quarter and I think they will fall by another 5-8 per cent before the year end as soon as the realisation sets in with vendors that they are going to have to decrease their prices to get a sale.
"By Christmas vendors will see that they have to be more realistic."
But Mr Airey did not place all the blame on the sub-prime scandal in America that sent tremors around the world, as higher interest rates and the introduction of home information packs "have all reduced demand".
Nevertheless, the shocking speed and largely unpredicted nature of the US crash has seen UK property commentators take a more critical look at the markets closer to home.
Unfortunately, the similarities are striking.
House prices are incredibly high due to sustained demand and a lack of new build coming to the market, while household savings have dwindled to just 3.1 per cent of disposable income as debt has soared to account for seven per cent.
Indeed conditions may be even worse in the UK than they were in the US before the property market seized up.
The Financial Times highlighted that house prices have risen faster in the UK than in America over the past ten years - 144 per cent to 127 per cent, according to the FT and Case-Schiller indexes.
In addition, total household debt is significantly greater in the UK, at 164 per cent of the nation's gross domestic product at the end of 2006 compared to 140 per cent in the US.
"If US households are sinking in debt, UK households seem to be drowning in it," said Financial Times market commentator Martin Wolf.
"All this strongly suggests the possibility of house price weakness and a sharp reduction in the household financial deficit.... this would seem a recipe for a slowdown, possibly even a recession."
Although a correction in the markets is difficult to predict, Nationwide's estimate that house prices in the UK rose by less than one percent in August and Halifax's report claiming September prices fell by 0.6 per cent could be indicative of a wider price dip around the corner.
Inevitably, this is leading to reduced mortgage activities and purchases as buyers look to conserve their finances till more certain times.
"Potential house buyers have become far more cautious as they wait and see what effect interest rate rises will have on household finances," a spokesperson for the Royal Institution of Chartered Surveyors (Rics) said.
"Affordability is at its most stretched in over a decade and many will worry that rising mortgage repayments will prove a step to far."
For many, this threshold has already been crossed as Rics reported that repossessions rose by nearly a third in the second quarter of 2007 - echoing the problems that occurred in the US.
By 2008, the yearly tally of repossessions in expected to have reached 45,000, with many of these owners having been buy-to-let investors who have found themselves unable to keep up with rising mortgage costs.
But whether the British house of cards will tumble may depend on the sub-prime mortgage sector, which played a major part in the US downturn.
Lenders supplying these household loans to people with bad credit are currently responsible for 70 per cent of all home repossessions, according to the BBC.
A survey of 7,000 court hearings by Panorama and Five Live uncovered the vastly disproportionate risks involved in sub-prime for lenders, but the mortgages continue to be sold in abundance.
Most worryingly for the UK property sector is that the foreclosure rate for US sub-prime loans was just 55 per cent, suggesting that the sector is being managed even more recklessly than in America, despite the criticism levelled at firms there.
Critics suggested that the Financial Services Agency (FSA) has been a "light touch" on sub-prime and self-certification lenders in the City and called for greater restrictions to be imposed.
But the FSA told the BBC that its July review of sub-prime mortgage lenders "found weaknesses in responsible lending practices and in firms' assessments of a consumer's ability to afford a mortgage" and said: "We will take action against firms that do not adhere to our rules or treat their customers fairly."
But while the threat of a copy-cat crash looms in the UK sub-prime market, it is unlikely that confidence will return among residential property buyers.
Similarly, investors in commercial property will likely be wary of suffering the fallout of a further crash in the market.
Already the outside influences of overvaluation of property and the global credit crunch have impacted on the commercial sector, with funds dropping for the first time in 15 years this September.
A boom in investment over the past year and a half has come to an abrupt halt due to overvaluation fears and a downturn.
"The last time UK commercial property saw a negative total return was in September 1992," Philip Nell, head of UK retail property funds at Morley, told the Financial Times.
"Values have been affected pretty much across the board."
But it is not just a slide in property values that is threatening the commercial market, as Rics has highlighted the threat of rising yields which reduce total returns to just three per cent for 2007 and even completely wipe out all rental income the following year, according to the group's predictions.
Worries over the future of the sector are constraining purchasing or new rental deals in a similar way to the residential market as few are willing to get their fingers burnt by taking an unnecessary risk.
Only 85 commercial property deals were done in the month to October 3rd, down from an average of 125 a month over the past six months, according to the Rics database.
And this has dropped further at the start of this month with only 30 deals being completed in the first two weeks of October.
British Land was clear in placing the blame for this on the worldwide credit difficulties, saying it had forced it to abandon the sale of Meadowhall, a £1.7 billion Sheffield shopping centre.
Sealing a deal proved impossible for any prospective buyers as investors were unable to find enough financing from banks and other investment groups, Britain's second largest property trust claimed.
But an additional threat for commercial firms would be a reduction in consumer spending if a recession kicks in.
With companies already tightening their belts as customers do the same, high-priced rental property may prove less economically viable for some firms and they may find themselves forced to downsize their operations – meaning larger properties being left empty and rental incomes falling massively.
Rics issued a warning that this was not all too distant a possibility, as senior economist at the institution Oliver Gilmartin said: "We have probably reached a peak in terms of office rental growth and we will see the effects from banks laying workers off, which haven't come into the numbers yet."
With few analysts predicting the UK will ride out the storm, however, it is worth remembering that the resilience of British property has been regularly questioned over recent years - and has continued to defy predictions of a downturn.
But with so much up against the market, could the bubble really be starting to burst at last?
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