Ukraine crisis boosts London property
05-04-2014
One Hyde Park, London, "oligarch ghetto"?
Ukraine crisis boosts London property
When the Ukraine crisis started The Times carried an editorial saying that “the squeals from Kensington’s estate agents will be audible in Moscow”. Not so, says a feature in Sunday’s Financial Times, which claims that both Ukrainian and Russian oligarchs are now heading over to London with suitcases full of cash looking for a safe haven.
The FT quotes JLL residential research’s estimates that Russian capital flight will quadruple year-on-year, and Savills’ estimates that the £180m that Russians spent on London property in 2013 will rise sharply in 2014. Wealthy Russians who have been considering buying in London appear to be speeding up those processes (no bad thing also, when rapidly rising prices are leading to sellers taking higher offers after initially agreeing a price, in a process known as ‘gazumping‘ – a particular and scandalous feature of the British property market).
However, they are doing so via an offshore company rather than as a private individual – where the purchase would be registered on the publicly available Land Registry – to preserve their anonymity and protect against assets being frozen due to sanctions. To avoid this secrecy, the UK government has announced a new public register to force UK owners to reveal their owners. The FT doubts this will be effective. They also quote a London agent who is looking for properties in Highgate, North London for two buyers arriving from Ukraine and requiring properties in a hurry.
But whichever the correct scenario – sanctions wrecking the Russians-in-London market, or boosting it – “the outcome will barely be noticed”, according to Naomi Heaton, chief executive of London Central Portfolio. She says that while foreigners may make up 83% of the property buyers in London, “London’s metamorphosis into ‘Moscow-upon-Thames’ is greatly exaggerated. It is reported that Russians represent just 2% of all buyers. HM Land Registry recorded just 242 property sales over £5m in 2013, of which only 51 were over £10m – the sector most usually associated with the Oligarchs.” She says it is factors such as Parisian taxes and the Arab Spring that is driving foreigners to London, with sophisticated Asian buy-to-let investors LCP’s main market, rather than the “lock up and leave” Russians.
By Christopher Nye, editor, OPP Magazine