Tough measures against Russia set to reshape London’s property market

UK government proposals to seize the homes of wealthy oligarchs and a push for more transparency over ownership threaten to freeze more than £1billion worth of property and hurt the market for expensive homes in the capital, officials have warned. real estate experts.

Measures in response to Russia’s invasion of Ukraine last week would end a decades-old practice of using London property as an easy, safe and discreet place to park cash, including ill-gotten gains,” said Andrew Langton, president of Aylesford International, a real estate agency that caters to wealthy clients.

“The severity of these sanctions is the start of a new world, a new market. I don’t think you can hide any more,” he said.

Estate agents believe the two-pronged approach will have a wider impact by deterring the super-rich in other parts of the world, including China and the Middle East, from investing.

“If the government changes [transparency] requirements, it will not only affect the Russians. It’s a pretty big assault on London if they’re making it really hard for people to get a bolthole here,’ an agent said.

The property seizure proposals would likely require legislation, and government lawyers fear the plans could face legal challenges because they would undermine UK property rights. No final decision has been taken by ministers on whether to proceed.

British sanctions have so far focused on a small group of oligarchs with direct links to Russian President Vladimir Putin, but more people are expected to be targeted.

Russian buyers were once the driving force in London’s upscale market, with billionaires investing heavily in expensive areas such as Belgravia © Irstone/Dreamstime

According to several agents and lawyers who work in the London market, this threat of sanctions and worsening attitudes towards wealthy Russians has already prompted a number to consider selling.

The most prominent of them is Roman Abramovich, who is not on the sanctions list. He confirmed on Wednesday that he had put west London football club Chelsea up for sale. But he has also put his more than £100million mansion in Kensington Palace Gardens on the market, according to two people with knowledge of the deal. Abramovich declined to comment on the sale of the property.

Yet the ability of any super-rich Russian to sell property in the current climate is likely to be hampered, as agents and lawyers have already begun to treat wealthy Russians with caution since the invasion a year ago. week.

“You will be hard pressed to find an agent or attorney to act for you if the source of your money is nefarious or in any way murky,” said Roarie Scarisbrick, buying agent at Property Vision. “The sanctioned oligarchs will not be represented by a sales agent,” he added.

According to an analysis by Transparency International, at least £1.5 billion of British real estate, much of it in London, has been bought by Russians accused of having links to the Kremlin or corruption.

“What will happen to these houses of oligarchs? I think they’ll be sitting around collecting dust,” Langton said. “I think you will find that these properties have no value – they are frozen,” he added.

While the sanctions are likely to have a more immediate impact, accelerating new transparency measures in response to Ukraine’s invasion may ultimately prove more profound.

The government has fast-tracked a bill to reveal the true identities of landowners who have previously used shell companies registered in tax havens, such as the British Virgin Islands, to disguise ownership.

The move marks a decisive break with a time when anyone could invest small fortunes in London property and keep their name off the title deeds.

“If a Russian oligarch owns property in the UK – even through a whole host of shell companies – then he is the beneficial owner of the property,” said Bill Browder, a high-profile Kremlin investor and critic. .

If this ownership was clearly established, it would be easier for the government to freeze the assets, he added.

Bill Browder in Downing Street, London
Bill Browder, investor and Kremlin critic: ‘If a Russian oligarch owns property in the UK – even through a whole host of shell companies – then he is the beneficial owner of the property’ © Tolga Akmen/AFP/ Getty

Long called for by anti-corruption and transparency campaigners, such a register would remove one of London’s main draws for shoppers far beyond Russia who want to keep a low profile.

Russian buyers were once the driving force behind London’s upscale market, with billionaires investing heavily in expensive areas such as Belgravia, Knightsbridge and Highgate, and gated estates in Surrey.

The number of title deeds in England and Wales registered in the names of people with Russian mailing addresses rose from less than 100 in 2010 to 710 in 2016, according to analysis by the Center for Public Data (CFPD).

But the pace of property acquisition by Russians has slowed in recent years and they have been replaced by buyers from Hong Kong, China and the Middle East, who have been behind some of the biggest deals in London.

According to real estate agency Knight Frank, London attracted $3 billion in real estate investment from foreign buyers last year, more than any other city in the world.

According to the CFPD, much of this investment goes through companies registered in Jersey, the Isle of Man or the British Virgin Islands.

Ministers’ tough new stance could change that, Langton said: “I don’t think any solicitor today will be happy to act for an overseas buyer in the UK without looking at every penny coming into this country. I think those days are over.

Penny D. Jackson