The Law of Unintended Consequences impact on London house prices

The economic consequence of the Ukraine war may well have a greater impact on the London residential property market than sanctions against the Oligarchs.

The crisis has brought in its wake higher inflation and bond yields that will inevitably raise mortgage rates. On the one hand wealthy investors may buy property as an inflation hedge. On the other hand the surge in energy and food prices is already causing a cost of living squeeze in a slowing economy. First time buyers are struggling to pay high rents. Bottom line these economic trends are likely to end the remarkable property boom since Covid restrictions were relaxed early 2021.

The London residential property average price rise of 5.5 per cent in 2021 was already lagging the appreciation of 10 to 20 per cent in the cheaper British cities and areas of the midlands and north England, Scotland and Wales. Indeed, the average price growth of 10.7 per cent of England was almost double that of London.

Although the boom is ending it is exceedingly difficult to predict whether prices will fall in the coming twelve months. The London residential market has become highly complex because of geopolitical factors.

Although average London prices and rents are steep for first time buyers in worsening economic conditions, there is a shortage of quality properties. Growing numbers of Hong Kong emigrants are entering the UK. Wealthy Hong Kong people have invested in the UK for years. But the UK Home Office has disclosed that it had granted visas to 76,000 applicants since it opened the doors to those fleeing the Beijing regime. These people are expected to buy in London and other UK cities if they can get their money out of Hong Kong. Moreover, the door is opening for Ukrainean refugees.

On the other hand, financial sanctions against the Oligarchs may bring in their wake the Law of Unintended consequences.

Estate agents who already have more stringent client disclosure requirements caution that foreign buying of UK property has begun to dry up. Covid travelling restrictions has been a major reason. More recently domestic buyers have accounted for the majority of property deals over 5 million pounds, a specialist estate agent said. Agents also report that some wealthy Russian have begun to cut sales prices and some are considering moving to Dubai.

Sanctions are indeed tightening. Parliament has passed The Economic Crime (Transparency and Enforcement) Act. It aims to reform on the true foreign ownership of property. It strengthens the government’s ability to confiscate property and other assets from Oligarchs close to the regime of President Vladimir Putin and other financial or political criminals.

The Act insists that there should be transparency regarding overseas companies that own UK property. It requires these companies to declare their beneficial owners. It also requires existing owners in England and Wales to report beneficial ownership information on properties bought before January 1999.


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Transparency International UK calculates that since 2016, property worth 1.5 billion pounds ($2.3 bn) was bought by Russians either accused of corruption or with links to the Kremlin. Of this total, 830 million pounds is owned through offshore companies. But Transparency International also estimates that a further 4.2 billion pounds of “questionable funds from around the world”—China, Middle East, Africa, Asia and South America— is in London property.

Transparency International estimates that around 94,000 properties in England and Wales are controlled by overseas companies – including 84,000 which reside in offshore secretive jurisdictions such as the British Virgin Islands.

“Transparency over who really owns property here, is vital to addressing Britain’s role as a global hub for dirty money from Russia and elsewhere,” said Rachel Davies, Head of Advocacy at Transparency International UK.

Counter arguments

Property agents and lawyers who have been heavily criticised for advising the Oligarchs and protecting their assets, have a counter argument. They respond that the majority of their wealthy foreign clients are not laundering money. They want to keep their identity private for a variety of reasons, for example protection of their families from hucksters, burglars and other criminals. These people, who previously bought British property because they thought it was a safe haven, may now have second thoughts, lawyers and other advisors contend.

The Office for National Statistics estimates that 73,000 people born in Russia were resident in the UK in 2020. But Aston Chase, an agent, claimed in a recent report that there were more than 150,000 Russians living in London and other cities. According to estimates they own around 8 billion pounds worth of real estate, businesses, and other investments in the UK. Some are super rich and not so rich. Many have children and relatives living in the UK, their children go to school in Britain and they have been accepted as British citizens. The majority haven’t made money via nefarious means and many have fled Russia because of fears of persecution by the Putin regime.

© copyright Neil Behrmann- all rights reserved.   A different version of this article was first published in The Business Times Singapore . For other Asian and global articles try

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