Alec Marsh

What the flight of Russian money means for the London property market

What the flight of Russian money means for the London property market
Roman Abramovich (Getty Images)
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Ever since the early 2000s, London’s luxury property market has been the preserve of foreign investors, many of whom are purported to be Russian. In Chelsea, Highgate and Hampstead, streets of empty mansions quickly became an inevitable part of city life, while the Russian investment phenomenon was dubbed ‘Londongrad’.

Thanks to the use of myriad offshore companies and ownership structures, and the practice of buying properties in the names of third parties – so called nominee accounts, it is all but impossible to identify the owners of these houses. Short of posting a private detective outside of each one for weeks on end and hoping the real owner shows up, the exact number of Oligarch-owned homes remains a mystery.

What is clear is that many high-net worth Russians might now be trying to free up capital by selling houses as Putin’s war rages in Ukraine and sanctions hit. Roman Abramovich has reportedly put his £150-million mansion on Kensington Palace Gardens and his three-storey waterfront penthouse in Chelsea – bought, it’s reported, for a whopping £22 million in 2018 – on the market. And he won’t be the first to feel the heat from the UK government and vote not just with his feet, but with the Land Registry.

It begs the question therefore: just how much of London can we expect to be put up for sale? And will it affect the property market?

Just last month, the home secretary Priti Patel announced the closure of the Tier 1 ‘golden visa’ scheme for investors – a way for rich foreigners to come and settle in Britain. Among the voices of dissent was Kyra Motley, a lawyer at Boodle Hatfield. She pointed out that the scheme had brought at least £17 billion of investment into the country since its inception under Labour in 2008, much of it from Russians. Indeed, billions more was doubtless have been ploughed into property as a result – and in the very best postcodes as well as the school fees at elite public schools. Of the 12,000 visas issued under the Tier 1 scheme since 2008 some 2,581 were issued to Russians. This gave them the right to bring their immediate families with them. And these family members possibly had properties investments made on their behalf too.

Yolande Barnes, professor of real estate at UCL and formerly director of research at Savills, reckons it’s safe to estimate that wealthy Russians own ‘several hundred’ of the top properties in prime central London – encompassing Westminster, Kensington and Chelsea, and Hampstead – based on annual transaction data she saw when she was in the business. My sense is that Barnes is correctly hedging on the side of caution in her estimate.

A swathe of exceedingly rich Oligarchs quitting the London property market won’t do it any favours. And let’s not forget that it hasn’t really found its feet since peaking in 2014, and is only just recovering from the lull in prices prompted by the pandemic.

And then there’s the rest of the capital to think about: according to the Office of National Statistics there are an estimated 15,000 Russians living in Greater London with a sizeable residential footprint.

Could market jitters in London’s high-end property market filter down to the rest of us? It’s hard to know for sure. But historically the capital acts as a bellwether for the rest of the country. I dare say that, like headmasters at smart public schools who are suddenly eyeing up a few more vacancies next September than they anticipated, there isn’t an estate agent in London who’ll own up to it. But the depth and breadth of Russian wealth in Britain is considerable and we would be naïve not to expect to feel its absence if it starts to run. 

Just like higher oil and gas costs, many would consider this a price worth paying for facing down the Kremlin over Ukraine. And they’re right. But just remember, principles can be expensive.

Written byAlec Marsh

Alec Marsh is editor-at-large at Spear's magazine and is the author of Rule Britannia and Enemy of the Raj.

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