Friday, 10 November 2017

How the corrupt London property market has happened >>> Kleptocracy, a hobbled planning system and an obsession with house prices

It has to be asked to what extent the 'development' and 'housing' being encouraged is actually of benefit to local communities:
Futures Forum: Developers 'forcing' local councils to allow more housing... as long as its not affordable housing

And it has to be asked to what extent this 'growth' is actually being fuelled by the wrong sort of 'investment'.

The publication of the Paradise Papers has blown open the workings of the UK's financial markets:
'Corruption hardwired into our financial system': reactions to Paradise Papers | News | The Guardian

And this is very much part of the UK's property markets - and it's been going on for some time now:
UK properties held by offshore firms used in global corruption, say police | UK news | The Guardian - March 2015

It's particularly about how 'kleptocracy' has been seeping into the London property market:
The dark side of Britain’s gold rush: how corruption crept into our suburbs | UK news | The Guardian - January 2017
Revealed: the tycoons and world leaders who built secret UK property empires | News | The Guardian - November 2017

Transparency International has been delving into the darker corners for some time now. This is from December last year - where, again, Panama is in the limelight:

Our new publication focusing on corrupt wealth in London property.

Using multiple data sources, this report finds that there is no data available on the real owners of more than half of the 44,022 land titles owned by overseas companies in London whilst nine out of ten of these properties were bought via secrecy jurisdictions, such as those named in the Panama Papers.

This lack of data means it is extremely difficult to ascertain any links between these companies and any individuals with political influence (Politically Exposed Persons, or PEPs), who Transparency International believe cause the greatest corruption risk. Research found 986 land titles owned by PEP related companies, although the true number could be much higher. More than three quarters of these companies are registered through either Panama or the British Virgin Islands.

London Property: A Top Destination for Money Launderers – Transparency International UK
Faulty Towers: Understanding the impact of overseas corruption on the London property market – Transparency International UK

In April this year, however, the UK government promised to reveal who is buying up London property:
London’s housing crisis is abetted by illicit funds - Financial Times
Government proposes new register to expose overseas property investors - Telegraph
British police get a new weapon to fight corruption - One way or another - Economist

But Transparency International is not convinced:

‘Corrupt risk’ states behind Kensington homes

ALEX LAWSON Thursday 10 August 2017

A Kensington block in a development at the centre of a row over rehousing Grenfell Tower victims is to be more than a third owned by anonymous firms or by buyers from states considered to be a high corruption risk, it has emerged.

An analysis of Land Registry data by Transparency International for 153 new homes at 375 Kensington High Street found that more properties were bought via British Virgin Islands firms than any other jurisdiction, including the UK. The development, by St Edward, a subsidiary of Berkeley Group, offers £2.4 million flats with 24-hour concierge service.

The Government promised to introduce a register April 2018 revealing the true owners of overseas companies buying property in the UK.

But Rachel Davies Teka, head of advocacy at Transparency International UK, said there are now serious concerns about whether plans for the new law will now be "kicked into the long grass. The Government must urgently clarify whether it intends to be part of the problem or the solution to the UK’s role as a safe haven for corrupt money," she said.

She added: “The harrowing scenes at Grenfell Tower prompted many questions about how citizens in that borough are treated and focused attention on the issue of housing in Kensington and Chelsea. Our previous research has already found that this borough, and neighbouring Westminster, to have the highest levels of anonymously owned property.”

‘Corrupt risk’ states behind Kensington homes | London Evening Standard

Last month, the publication of the property industry delved into the subject:

Kleptocracy tour: dirty business

13 October 2017 | By Emanuele Midolo

I am standing at a bus stop on Pimlico Road, just in front of the Chelsea Barracks site, together with a small crowd.

But this is not the usual bunch of commuters and tourists. They are journalists, cameramen and photographers from around the world. And we are at the meeting point for what is probably the strangest guided bus tour of London. After a short wait the bus turns up; an innocuous coach with a sign fixed to the windscreen that reads ‘Kleptocracy tour - Nigeria’.

Kleptocracy Tours started in early 2016, when Roman Borisovich, a former banker-turned-anti-corruption campaigner, organised the first sightseeing of properties owned by foreign ‘kleptocrats’. Borisovich is a massive man, with short blond hair and a thick Russian accent. He worked for 15 years in Wall Street and the City of London and is a supporter of and, more importantly, an adviser to Alexei Navalny, a Russian dissident blogger now considered the leading political opposition to president Vladimir Putin.

For the past two years, he has been doing in London what Navalny has been doing in Russia. Supported by a team of investigative journalists and researchers into money laundering, he tours the capital to expose the lavish properties bought with dirty money - the first tour focused on oligarchs from Russia, Ukraine and Kazakhstan. He has even set up an organisation called Committee for Legislation Against Moneylaundering in Properties by Kleptocrats (ClampK).

“Our goal is to stop the avalanche of dirty money pouring into UK real estate and particularly into central London,” he says as the bus sets off.

The Cambridge dictionary defines kleptocracy as “a society whose leaders make themselves rich and powerful by stealing from the rest of the people”. It sounds a little bit like the definition of corruption so why not just call it the ‘corruption tour’? “Because kleptocracy is not corruption,” says Oliver Bullough, journalist and author of The Last Man in Russia. “Corruption has existed as long as there have been officials. Kleptocracy, however, has been around probably since the 1960s, when people started using the word with the sense we give to it today.”
Dark side of globalisation

The phenomenon is characterised by three elements, he says: stealing, a corollary of corruption; obscuring, whereby the origin of the money is disguised by laundering it; and spending - on expensive cars, yachts, private jets and, of course, property.

In that regard, if kleptocracy is “the dark side of globalisation”, London is very much the Death Star.

“London is a real problem,” admits Bullough. “What makes London so special is that unlike remote places such as the British Virgin Islands, here you can obscure your money with the network of overseas territories and Crown dependencies and, most importantly, you can spend it, with all the beautiful things that are for sale in our wonderful capital.”

The scale of offshore ownership of London real estate is probably unrivalled anywhere else in the world. In its report, London Property: A Top Destination For Money Launderers, TI estimates that at least 40,000 properties in the capital are owned by an offshore entity.

Although it is perfectly legal to own an offshore company, it is equally true that these structures might also be used, as the leaked Panama Papers have shown, for illicit purposes.

According to the National Crime Agency, about £100bn of illicit capital passes through London every year (that’s 12% of all the stolen capital in the world). Property is an easy target for criminals who need to launder big sums through assets with a high monetary value.

“We can’t do much about corruption, which is endemic to many countries, including Nigeria,” says Bullough. “But we can do something about kleptocracy.”

This is the purpose of the kleptocracy tours.

By exposing these properties, Borisovich and his unusual tour guides hope to dissuade others from stashing their dirty money in the UK.

“We’re calling on the government to stick to its promises on transparency,” says Borisovich. “At the anti-corruption summit, the last government issued a number of commitments that have been stalled with the new executive.”

Ghost towns

Rachel Davies Teka, head of advocacy at TI UK, believes that the rules need to be changed. “You can now easily set up an overseas company in a secrecy jurisdiction, buy a house in London and you don’t have to tell the Land Registry who you are,” she says. “The government said it was going to change this and that legislation would be introduced through parliament by April 2018.”

However, Davies Teka says that the government is almost certainly going to miss its own deadline. The upshot is that offshore-registered entities will continue to regard London as a safe haven and buy real estate there.

The amount of Nigerian money coming into the capital is a case in point. It has effectively created a ‘Nigerian quarter’ within posh neighbourhoods such as Maida Vale, St John’s Wood and Marylebone. However, far from resembling a ‘little Abuja’, as you would imagine, they are ghost towns. In fact, most of the properties we visit are not lived in.

While we are standing in front of one house in Maida Vale, the vicar from the local church comes by asking what we are doing. “That’s funny,” he says, when we tell him. “I’ve been here for 15 years and I’ve never seen anyone in that house.”

In short, kleptocracy is directly contributing to the ‘lights out London’ problem. Foreign buyers even have their own technical term to describe such properties: ‘buy-to-leave’.

“Houses have literally been turned into retirement savings boxes for foreign kleptocrats,” says Page. “All these empty multi-million‑pound houses within London’s most expensive neighbourhoods are just metres away from places where low-income Londoners live in neglected conditions. And obviously we had the Grenfell Tower disaster, which shows just how stark this juxtaposition is.”

Kleptocracy tour: dirty business | Analysis - print | Property Week

And this is effecting how 'ordinary people' are living in London:

Big Capital by Anna Minton — who broke London’s property market?

How houses in the city went from being homes to financial assets

JUNE 2, 2017 Nathan Brooker

If the price of food had risen at the same rate as London house prices over the past 40 years, then a chicken would now cost £100. That’s how deranged the city’s property market has become. At the beginning of 1996, the average home for a first-time buyer in London cost 2.6 times the median salary; at the end of last year it was more than 10 times, and more than 30 in the wealthy borough of Kensington and Chelsea.

What this shows is that the price of London property no longer bears any relation to wages, and certainly not to median wages. Houses were once places where people lived; today, first and foremost, they are financial assets.

In Big Capital, the journalist and academic Anna Minton seeks to explain why the property market is broken and who is to blame. In a slim, readable volume of fewer than 200 pages, she gives us a convincing account.

The culprits make for a strong but familiar cast: Russian oligarchs, overseas investors, housebuilders, amenable MPs and estate agents. Illustrating the lengths to which luxury developers will go to get their projects approved, Minton speaks to a man from Brighton who was paid to attend a planning meeting and make positive noises about a new block of flats. Then there is the middle-class mother of two who, unable to afford the rent on a bigger flat, has been considering curtaining off an alcove in the hallway and putting a mattress in it, so that her seven-year-old daughter no longer has to share a room with her older brother. The mother describes it as Dickensian. She’s right.

Minton comes out swinging punches. On page one she’s on a bus tour of London, with the guide pointing out property owned by overseas companies. The “Kleptocracy Tour” takes us from Westminster to Highgate, past houses owned by the wife of a Russian minister, the son of a deposed African leader, and a Ukrainian oligarch who was arrested in 2013 on suspicion of corruption and forming a criminal organisation.

For Minton, this is the top of the champagne pyramid. She describes high prices trickling down through London: billionaires displace multimillionaires, who in turn displace the millionaires who displace the rest of us. And at the bottom of the deck, people living in housing estates find themselves evicted. When their homes are knocked down and replaced with luxury apartments, the process starts again.

Throw in a planning system that has been allowed to inflate underlying land costs because it has been hobbled by MPs; the monopolisation of house building by a few big companies, which limits new supply; and Margaret Thatcher’s Right to Buy scheme, which sold off large amounts of council housing, and we’re putting together a picture of how that chicken got so expensive.

Minton’s focus is on the human costs. The more housing is treated like a financial asset, the more likely it is that those without assets will lose out. It speaks to the book’s central question: who is London for? Is it for the international super-rich, the institutional investor or the ordinary working Londoner?

The only problem with framing the debate like this is that it gives us a free ride. Minton’s book, while it doggedly — and successfully — needles those behind the housing crisis, doesn’t look inward, at our own complicity. The British are obsessed with house prices. Any move by policymakers to reduce them significantly would be politically toxic.

We also get little sense of the intergenerational tension. Millennials have been all but shut out of the market unless they have wealthy parents — a report last month named “the bank of mum and dad” as the unofficial ninth biggest mortgage lender in the country, funding nearly two-thirds of all property purchases for the under-35s, at least in part.

That said, the merits of Big Capital are hard to ignore. It’s a studied, sustained attack on a market that has been mishandled by successive governments for 40 years, not because politicians have been unable to remedy it but because it has been expedient not to. It makes for painful — yet compelling — reading.

Big Capital: Who Is London For?, by Anna Minton, Penguin, RRP £9.99, 178 pages

Big Capital by Anna Minton — who broke London’s property market?

The planning system is stacked against 'ordinary people':
Futures Forum: A solution to our housing problems >>> stop the Big Four developers from land banking and claiming that each and every development will not be viable >>> and encourage small-and-medium-sized builders
Futures Forum: ‘Viability assessments’ allow developers to drop affordable housing
Futures Forum: How to avoid affordable housing
Futures Forum: The failure on affordable and social housing

nally, we continue to be  overjoyed at the prospect of further rises in house prices:
House prices in the UK will increase 56% by 2027 housing market expert claims | Property | Life & Style | Express.co.uk


Buy Growth Flex Online said...

Real Estate Agent in London
Estate agents in London - Heaven Estate Agent LTD, Guaranteed

Hamilton International Estates said...

Awesome Blog! Thanks for sharing this post. We think it very likely that the influx of corrupt money into the housing market has pushed up prices.
Buy to let in uk
Buy To Let Properties UK