OUR GLOBAL MOVEMENT
London is suffering from a severe housing crisis. The UK Government describes the property market as “broken”.Costs have risen twice as fast as the incomes of Britain’s under-44s. Thousands of people are homeless or sofa surfing. Many more live in cramped, substandard living conditions. Meanwhile tens of thousands of properties lie unused for the majority of the year round. We have spent the last year researching how overseas corruption has contributed to these problems. This is what we found. Click here for the press release and full report.
Every year billions of pounds of corrupt money enters the UK. This is money stolen from some of the most impoverished and repressed countries in the world by corrupt politicians, public officials and businesspeople.
A large amount of this illicit money flows into the London property market.
Investing in property is desirable for corrupt individuals as it provides a safe place to hide stolen wealth.
We have identified over £4.2 billion worth of properties bought by politicians and public officials with suspicious wealth.
This could be the tip of iceberg.
London also attracts billions of pounds of ‘crisis capital’.
Crisis capital is when large amounts of wealth flees insecurity overseas, often caused by corruption. This could be families sending money abroad to escape the chaos of the Arab Spring or Chinese officials looking to avoid the country’s anti-corruption drive.
Crisis capital includes both legal and illegal money. Our research has found that the system for preventing illegal money entering the property market is not working and needs to be reformed.
Hundreds of billions of pounds has fled Russia and China in recent years. Much of this money has been invested in London property.
Developers are becoming reliant on investment from those seeking to move their assets out of high corruption risk jurisdictions. By doing so they are exposing themselves to heightened money laundering risk.
We used Land Registry data to analyse who was buying apartments in 14 landmark London developments.
Across the 14 developments around 80 per cent of apartments were being sold to overseas investors. 40 per cent of investors came from countries with a high corruption risk or were companies registered in a ‘secrecy haven’.
Secrecy havens do not publish the details of companies registered there or who really owns them. ‘Anonymous’ companies registered in secrecy havens are often used by corrupt individuals looking to launder illicit wealth.
In a survey of Londoners, we found that more than one in five people thought overseas investors bought London property in order to launder money.
Our survey showed over 70 per cent of people thought it was unacceptable to hide the real owners of companies through the use of anonymous companies.
More details on each of the developments can be seen on the map below:
Our research also found that corruption overseas could be having a direct impact on house prices in parts of London.
A recent academic study identified that in times of global uncertainty house prices in certain parts of London increase due to higher demand.
For example in October 2012, following the Arab Spring – an event in which corruption played a key role – investors from the Middle-East spent 50 per cent more on London property than they had done the previous year.
Our survey showed that over half of respondents believed “rich people from overseas buying top-end London property as an investment” was a leading cause of rising house prices.
There is emerging evidence that investments in luxury Central London property could be having an impact on the wider market. This is called ‘the ripple effect’.
The ripple effect explained:
1) International buyers purchase prime property in London’s most exclusive neighbourhoods
2) Existing residents from these areas feel pushed out by international demand and start to move to surrounding areas
3) As demand for homes in surrounding areas increases, prices start to rise, making future buyers start to look further out of Central London to more affordable areas
4) This in turn increases demand in outer London areas, which leads to increasing prices
5) Eventually London house prices become too expensive for many first-time buyers leading them to purchase homes outside of London
In our survey, half of 25 to 49 year-olds said they had seriously considered moving out of London due to the cost of housing. These perceptions are shaping behaviour. In the past five years people in their 30s moving out of London has increased 50 per cent.
