London Property Market Hit
London is the destination of most foreign funds in the U.K. Last week a report from estate agency Knight Frank said London was the world’s top ‘wealth center’ due to its global popularity.
However, not all of that money is from legitimate origins, and law enforcement agencies have started to crack down on properties bought with illicit wealth.
Last year, law enforcers used a new power—the Unexplained Wealth Order—to investigate how Zamira Hajiyeva, wife of an Azerbaijani banker, managed to acquire an £11.5 million house in Knightsbridge. Their salary was far from sufficient for such a purchase, they argued.
The Unexplained Wealth Order gives authorities the power to seize assets over £50,000 owned by a person “who is reasonably suspected of involvement in, or of being connected to a person involved in, serious crime.”
In another move against money launderers, the Home Office said last week it would make getting a visa tougher for wealthy investors. The Tier 1 Investor Visa is a favorite of wealthy persons wanting British residency. These changes “will better protect the U.K. from illegally obtained funds,” the Home Office said.
However, these moves weighing in on an already tough property market. Knight Frank’s Prime International Residential Index (PIRI), which tracks luxury residential markets, found London’s had declined by 4.4 percent last year. On the ranking, which was released last week, London stood just nine places ahead of Lagos, Nigeria.
Real estate prices have similarly suffered. Coutts, a private bank that tracks properties in London worth over £10 million, said the number of properties sold in this category had fallen 12.1 percent in the 12 months to December 2018.
While a host of economic forces—including Brexit—are to blame, many believe the government’s hostility toward suspicious funds has taken its toll.
“We all know that, at the moment, the prime central London market has collapsed,” Mark Hayward, chief executive of NAEA Propertymark told the Treasury Committee last week. “So for those on the ground, perhaps in a small, niche company for whom the fees will be significant, will they ask too many questions, which could put people off purchasing.”
Source: Oliver Williams