Originally Syndicated on May 15, 2023 @ 12:01 pm
The London property market is suffering from the UK government’s harsh Russia policies, including asset freezing and barring affluent Russians. The market has always attracted Russian purchasers, who have spent billions in capital property. However, the restrictions have made it harder for Russians to buy and sell property in London, which could lower prices.
The focus of UK sanctions has predominantly concentrated on a limited circle of oligarchs with direct connections to Putin.
The UK government’s proposals to confiscate the residences of affluent oligarchs and the push for enhanced transparency in ownership have the potential to immobilize over £1 billion worth of property and negatively impact the high-end housing market in the capital. Property experts have cautioned that these measures, responding to Russia’s invasion of Ukraine, could bring an end to the long-standing practice of utilizing London real estate as a convenient, secure, and discreet haven for capital, including unlawfully acquired gains.
Andrew Langton, Chair of Aylesford International—an estate agency that caters to affluent clients—expressed that these sanctions‘ severity marks the dawn of a new era and market. He remarked, “Concealment is no longer viable.” Real estate agents believe that this dual-pronged strategy will deter extremely wealthy individuals from various parts of the globe, including China and the Middle East, from making investments.
An agent highlighted, “If transparency requirements are altered by the government, the repercussions won’t be limited to Russians. London could face significant challenges if individuals find it exceedingly arduous to maintain a retreat here.” The initiatives involving property confiscation would likely necessitate legislative action, and government legal experts have voiced concerns that these plans could be susceptible to legal disputes due to their potential infringement on UK property rights.
Ministers have yet to reach a conclusive decision on the course of action. While current UK sanctions have primarily centered on a small group of oligarchs with direct affiliations to Russian President Vladimir Putin, additional individuals are anticipated to become targets.
The looming threat of sanctions and the shift in sentiment towards affluent Russians have already prompted several individuals to contemplate selling their assets, according to insights from agents and attorneys operating in the London market. Notably, Roman Abramovich, who is not subjected to sanctions, has made headlines by placing Chelsea Football Club in West London up for sale.
Furthermore, insiders with knowledge of the matter claim that he has listed his mansion in Kensington Palace Gardens, valued at over £100 million. Abramovich chose not to comment on the property sale. However, considering the ongoing circumstances, it’s plausible that wealthy Russians will encounter challenges while attempting to sell properties.
Agents and attorneys have already begun treating affluent Russians with caution since the invasion a week ago. Roarie Scarisbrick, a buying agent affiliated with Property Vision, expressed, “Securing representation from a selling agent is unlikely for sanctioned oligarchs or those with dubious sources of funds.”
Transparency International’s analysis indicates that Russians accused of Kremlin links or corruption have acquired at least £1.5 billion worth of UK property, with a significant portion situated in London. Andrew Langton mused on the fate of these oligarch-owned residences, stating, “I anticipate these properties will remain vacant and unused.”
He added, “These properties are destined to become immobilized.” Though the sanctions are expected to have immediate repercussions, the acceleration of novel transparency measures in response to the Ukrainian invasion might ultimately have more profound effects. The government has expedited the process of implementing legislation that aims to disclose the true identities of property owners who previously concealed ownership through shell companies registered in tax havens like the British Virgin Islands.
This shift signifies a departure from an era where substantial investments in London property could be made anonymously. Bill Browder, an investor, and outspoken Kremlin critic, highlighted, “If a Russian oligarch possesses a UK property—regardless of a complex network of shell companies—he remains the ultimate owner.” Clarifying ownership could facilitate asset freezing for the government, Browder noted.
Demand for a registry that discloses property ownership has been advocated by anti-corruption and transparency advocates for a long time. Such a registry would eliminate one of London’s major attractions for international buyers seeking anonymity, especially those from beyond Russia. Russian investors once held a dominant position in London’s luxury property market, funneling investments into upscale neighborhoods like Belgravia, Knightsbridge, and Highgate, as well as gated estates in Surrey.
An analysis by the Center for Public Data (CFPD) indicates that the count of property titles registered to individuals with Russian correspondence addresses rose from under 100 in 2010 to 710 in 2016 in England and Wales. However, the pace of Russian property acquisitions has decelerated in recent years, making way for buyers from Hong Kong, China, and the Middle East, who have played pivotal roles in major transactions within London.
According to Knight Frank, London received $3 billion in foreign property investment last year, surpassing all other cities globally. A significant portion of this investment, as identified by the CFPD, flows through entities registered in Jersey, the Isle of Man, or the British Virgin Islands. Langton conjectured that the stringent stance of ministers could potentially alter this trend. He asserted, “Presently, I doubt any lawyer would willingly assist overseas buyers in the UK without meticulous scrutiny of their funds. Those days seem to have concluded.”
