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London, oligarchs and the Devon housing market

  • by JW

To what extent is ‘kleptocrat’ money distorting the property market in London – and beyond?


There’s been a huge amount of coverage of how the current crisis is affecting the British obsession with house prices:

The impact of Russia sanctions on London house prices | The Week UK

Londongrad must fall – or the US could raze it to the ground | openDemocracy

Revealed: The areas of England and Wales with the most Russian-owned property | NationalWorld

This concern has been growing for some time:

Sold out London: how Britain’s capital became home to the super-rich | by Hanna Liubakova | Medium

And the ‘oligarchs’ are from many parts of the world:

VICE News was invited on the inaugural ‘kleptocracy tour’ of London — a drive around some of the properties owned by Russian, Ukrainian, and Kazakh businessmen and oligarchs.

On Board the Russian Dissidents’ ‘Kleptocracy’ Bus

A big problem is that it’s very difficult to get any information about this – especially in the English-speaking world:

Limited real estate data in Australia, Canada, UK and US makes tracking down corruption more difficult

Knocking on kleptocrats’ doors – News –

The Panama Papers of 2019 did reveal some information about property being held by offshore companies – including in Sidmouth at the time:

Futures Forum: Property acquired in Sidmouth by offshore companies

But perhaps the most disturbing effect of huge amounts of unaccountable cash entering the property markets is that it distorts those markets.

Much of this distortion starts in London – where most of the cash enters the markets.

And a lot of this came out immediately after the Grenfell fire in 2017:

It wasn’t just the Guardian which relished the accidental publication of owners of empty second homes in Kensington: Grenfell: names of wealthy empty-home owners in borough revealed | UK news | The Guardian
Other sections of the press were gleefully revealing how the super rich are reaping the rewards of the UK property market:
Oligarchs and royalty who keep homes empty near Grenfell | Daily Mail Online and Grenfell Tower: Wealthy property owners with wealthy homes – Business Insider

Futures Forum: Empty homes and second homes >>> the kleptocracy and the UK housing market

Further investigations suggested how deep the system has been affected, if not infected:

Futures Forum: How the corrupt London property market has happened >>> Kleptocracy, a hobbled planning system and an obsession with house prices

However, as far as those of us living out in the provinces are concerned, how does a distorted London property market affect the South West?

Here is a complete republication of a piece from the Futures Forum of November 2017:

How does the London property market affect the UK?

In her piece for the CPRE in Devon today, Georgina Allen refers to the effect of the London housing market on the rest of the country:

Thousands of new-builds are breaking the skyline in East London and yet this huge amount of building is yet to bring prices down.  People move out of the centre because they can’t afford to live there and migrate to the outskirts, the outskirts get more expensive, so they move further out, dislodging the inhabitants there, who are moved even further out and so on and so on, the ripples continuing across the country. Our major cities are hollowed out and people live in areas they don’t necessarily want to be in, finding themselves dependent on their cars and transport to get them back to the place where they have a job.

By the time the ripples get to Devon, they’ve changed slightly. These ripples are the people who have decided they no longer need to commute to the city. They discover they can buy two houses in Devon for the price of their one in the South East and realise that they can fund their retirement/break through a buy-to-let. This has been the pattern of movement around us in South Devon recently. The new-builds, which were of course spun to seem as if they would solve our local housing issues, have often gone to people moving into the area.

Futures Forum: The Local Enterprise Partnership in Devon, conflicts of interest and calculating “housing need”

But this ‘ripple’ effect has been noticed for some time now:

London’s Linkages with the Rest of the UK

May 2004

Links between London’s housing market and the rest of the UK …

It may be, however, that the ripple effect partly occurs through equity transfer between regions. As was shown in Table 3.5, in 2002, London had the highest average level of equity release at £133,500, followed by the South East with £76,641. This suggests that, if a household moves from London to another area, it will have a very high level of equity to be transferred to another property. This will, in turn, increase demand in those areas and bid up prices. Eventually the effect will be spread over the country and the impact can be greater than will be evident from the population flows themselves.

Indeed, what has happened most spectacularly since the Crash ten years ago is the ‘investment’ of foreign capital, which has sent property prices in London through the roof:
Futures Forum: How the corrupt London property market has happened >>> Kleptocracy, a hobbled planning system and an obsession with house prices

This is not just the view of Transparency International:
Overseas corruption pricing Londoners out of the capital – Transparency International UK

But the property industry itself has understood what is happening:
‘Corruption drives high-end London property market’ – Estate Agent Today
Is Corrupt Money The Only Thing Supporting Property Prices in London? – Property Investor News

As has the mainstream press:
Corrupt foreigners who launder money through luxury London homes face crackdown – Telegraph
London homes are bling baubles secretly owned by foreign despots and very dodgy dealers | Daily Mail Online

One has to ask awkward questions:
How Corrupt Is The Property Market In Your Borough? | Londonist

And it’s all getting rather entangled in the Paradise Papers mess:
Futures Forum: Brexit: and the Paradise Papers

A map for the whole country had been put together by Private Eye before this particular rumpus – but it seems even more relevant now:

Selling England (and Wales) by the pound

IN September 2015 Private Eye created an easily searchable online map (see below) of properties in England and Wales owned by offshore companies. It reveals for the first time the extent of the British property interests of companies based in tax havens from Panama to Luxembourg, and from Liechtenstein to the South Pacific island of Niue. Most are held in this way for tax avoidance and often to conceal dubious wealth.

Using Land Registry data released under Freedom of Information laws, and then linking around 100,000 land title register entries to specific addresses, the Eye has mapped all leasehold and freehold interests acquired by offshore companies between 2005 and 2014.

Using this data the Eye published a series of exposes of the companies, arms dealers, oligarchs, money launderers and others who use offshore companies. Now Private Eye, using the same data, is also publishing a database of all properties acquired by offshore companies from 1999 to 2014, showing the address, the offshore corporate owners (some have more than one) and, where available, the price paid.
To download the 1999-2014 database, click here » (Excel file, 8.2MB)
Download the FREE Tax Haven Special Report here » (PDF)

Private Eye | Official Site – the UK’s number one best-selling news and current affairs magazine, edited by Ian Hislop

Click on the map to find properties acquired by offshore companies:

And so the current state of affairs in the capital has its ripple effects on Devon…
Coastal house prices soar by £400 a month over past decade – Zoopla

And pretty much everywhere:

London property: are you feeling the ripple effect?

As London’s housing bubble expands across many parts of the country, Caroline McGhie tracks its progress and discovers where property prices are rising fastest
03 Jun 2014

In the debate about the housing bubble, many questions are being asked. Is this a boom or a recovery? Is it opening a chasm between rich and poor, old and young? For people outside the capital, however, the biggest questions are: When will the London effect reach us? Where is the ripple now?

It is never easy to freeze-frame trends in property transactions or house prices, but Savills Research has attempted to do so by analysing Land Registry figures for local authorities in England and Wales. Price rises can be detected in six waves rippling out from the capital, with the weakest in the North and North East. But the recovery has also leapfrogged to particular cities, including Bath, Bristol, York and Manchester.

London property: are you feeling the ripple effect? – Telegraph

Finally: ‘more than being centered on supply and demand, much of Britain’s house price growth in recent decades has been fuelled by speculation and exuberance’:
Britain’s housing market is not being driven by a supply and demand imbalance – Business Insider

See also:
House prices: why are they so high?

Futures Forum: How does the London property market affect the UK?