Boost for luxury London property prices as Russians locked in
28/06/2022 07:00
By Carolyn Cohn and Kirstin Ridley
LONDON, June 28 (Reuters) - The war in Ukraine is making it
hard for even unsanctioned Russians to sell exclusive
residential property in Britain, adding to a shortage of supply
that has helped drive up house prices in prime locations, real
estate sources say.
Russian oligarchs, Middle Eastern oil barons and billionaire
Chinese entrepreneurs have been on a spending spree on London
real estate over the past three decades, snapping up trophy
homes and high-end commercial property.
But the four-month-old invasion of Ukraine, which Russia
calls a special military operation, has prompted Britain to slap
sanctions on more than 1,100 Russians it says have ties to the
Kremlin, spreading unease and freezing house sales in so-called
Londongrad, agents say.
"There have definitely been a number of transactions that
have not gone through, two in excess of 40 million pounds ($49
million)," said Charlie Willis, CEO of property broker The
London Broker, adding that in both cases, the buyers were
advised not to proceed "just because the seller was originally
Russian". He declined to give further details.
THE BIG SQUEEZE
A widespread shortage of available properties has pushed up
prime London prices by 4.7% since the invasion, according to
agents Benham & Reeves, although prices in Belgravia and
Knightsbridge - popular locations for Russians - have climbed
slightly less, at 3.3%.
"The market's being fuelled by a lack of supply," said Geoff
Garrett, director at mortgage broker Henry Dannell.
The number of prime central London residential sales was
down 30% between March and May compared with last year, though
still up on pre-pandemic levels, according to property data firm
LonRes.
Estate agent Aston Chase estimates there are over 150,000
Russians living in London who between them own eight billion
pounds of real estate assets, businesses, and other investments
in Britain.
But Mark Pollack, Aston Chase's co-founder, says wealthy
Russians are increasingly cautious about being caught up in the
web of sanctions.
"Russians aren't buying (in the same way) and they are not
selling, not necessarily because they don't want to in some
instances, but because they probably can't or it might be
sensible to hope the ... dust settles," he said.
Britain in February scrapped its so-called "golden visas"
for wealthy investors and last month announced plans for a new
economic crime bill, intended in part to identify the owners of
property in Britain and combat illicit finance, although critics
say loopholes remain.
Henry Sherwood, managing director of The Buying Agents,
which focuses on properties starting at around five million
pounds, said the crack down had helped dash hopes the war and
sanctions might lead to a flurry of cut-price Russian sales.
At the beginning of the war, "we had people ringing up
saying: 'Have you got any Russians selling?'," he said.
But he added: "The more discreet don't want to have anything
to do with them. Our buyers don't want to be associated with
firesales - they don't want to get into a transaction that will
never happen."
One unsanctioned Russian failed to secure three lawyers
before finding one willing to help him sell an expensive London
property, a senior executive at a property development firm on
the other side of the deal told Reuters.
Russian tenants including students are also finding it hard
to transfer funds due to sanctions, forcing them to withdraw
from the market in London, said Marc von Grundherr, director at
Benham & Reeves.
Unprecedented Western sanctions on Moscow, the withdrawal
from Russia of scores of Western companies and pressure on
London's advisory companies to cut links with Russian clients
have driven some Russian buyers to friendlier property hotspots
such as Dubai or Istanbul. urn:newsml:reuters.com:*:nL5N2VQ2JM
One Russian client, Pollack said, had pulled out of buying
an 18 million pound London apartment when Russian tanks rolled
into Ukraine in February because they were nervous about the
political rhetoric in Britain. They still want a London home,
but have halved their budget, he said.
But buyers from other regions are helping to keep the London
market buoyant.
International buyers have accounted for at least a third of
property purchases in prime central London locations in every
quarter between 2011 and 2019, according to data from Statista.
Vic Chhabria, managing director at agent London Real Estate
Office, which specialises in new constructions as well as
high-rise condominiums and luxury homes, said his appointment
diary was full, with most interest from buyers in Singapore,
Hong Kong and Mumbai willing to spend between two and 20 million
pounds.
A prolonged war, tighter regulation, rising interest rates,
raging inflation and brutal stock market drops could yet take
the heat out of some of that growth, agents added.
"The property market has been flying over the course of the
last two to three years," said Garrett. "All of these cycles
have to slow."
($1 = 0.8164 pounds)
(Editing by Mark Potter)
((carolyn.cohn@thomsonreuters.com; 44 207 513 4391;))