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The monthly magazine providing news analysis and professional research for the discerning private investor/landlord

Is Corrupt Money The Only Thing Supporting Property Prices in London?

Peter Hemple looks at the ‘dark side’ of the property market in the capital

Transparency International UK (TI-UK) released a report in April this year entitled Faulty Towers - Understanding the impact of overseas corruption on the London property market. The 68-page report aimed to garner some of the facts on just how much ‘corrupt’ money is being ploughed into London property and it managed to unravel some staggering numbers.

Defining what type of money it considers to be corrupt, TI-UK stated: ‘There is now a wealth of evidence to show that UK real estate, particularly in London, is attracting corrupt officials and businesspeople who have stolen money from some of the most impoverished and repressed countries in the world. These corrupt individuals laundered this money into the property market, often through the use of ‘anonymous’ companies registered in the UK’s Overseas Territories and Crown Dependencies. These secretive corporate vehicles cannot be found on a public register and leave few paper trails in their wake, allowing their ultimate owners to hide from scrutiny and enjoy their ill-gotten gains with impunity.’

In just a short space of time (between 2015 and early-2017), TI-UK identified London property worth over £4.2bn bought with ‘suspicious wealth.’ If that figure means nothing to you or does not sound like much compared to the entire London property market, then the percentage of new build units in London that are being sold to overseas investors almost certainly will.

TI-UK identified a significant and substantial money laundering risk in how new landmark developments are being financed off-plan by overseas capital. It stated: ‘Analysing Land Registry data for 14 landmark luxury developments, consisting of 2,066 future homes, we found almost 80% of properties were bought by overseas investors, and 40% of properties sold over the 14 developments were to individuals from high corruption-risk jurisdictions, or to companies based in secrecy havens.’

Whilst this model of development may have helped sustain construction levels within the capital during the financial crisis of 2008, it has also led to the current oversupply of high-end new build property coming onto the market at the moment.

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