Out from fog. London is waiting for oligarchs from Eastern Europe

Out from fog. London is waiting for oligarchs from Eastern Europe

Over the past five years, the proportion of the Russians among foreign buyers in London did not exceed 15%. Now this strap can be taken: British realtors notice an unprecedented activity of the Russians, Ukrainians and other Eastern Europeans. London housing market has traditionally been regarded by them as a bank where you may keep and increase. Buying a home in London for wealthy Russians now became also a possibility to avoid the sanctions that the European Union may impose against a large eastern neighbor.

11 billion rubles (£180 million) – that is how much the Russians have taken into London in 2013, investing the money in real estate of the largest city of the European Union. In 2014, according to some outlooks this amount can get close to the mark of fifty billion.

Roarie Scarisbrick, director of the buying agent Property Vision, says that a lot of the Russian clients who in previous years had just been considering buying in British capital, have stepped up to implement their plans to purchase in life. And this despite the fact that, according to the Knight Frank Prime Global Cities Index, elite real estate in London increased by 7.5% during the year, including the increase in Q1 2014 by 1.9%. Agency Fitch forecasts that overall property in the UK will rise in price for the year by 6%.

Out from fog. London is waiting for oligarchs from Eastern Europe  | Photo 1 | ee24

Real estate for wealthy customers in London is located on the Bishops Avenue. It's a quiet green area of Highgate to the north-west of the city center, there are parks, golf courses and, of course, luxury residences, hidden from prying eyes by fences and trees. Bishops Avenue is called as street of billionaires and here Russians buy huge mansions and wealthy Ukrainians with whole families escape from events in their home land.

Home prices on the Bishops Avenue exceed average London figures of €0.5 million and justify the glory of one of the most prestigious streets in the capital. 600 sq. m. mansion with six bedrooms is for sale for €11.5 million. Luxury house fully renovated and equipped with the latest technology, with nine bedrooms, swimming pool, gym, sauna, spa, movie theater and a variety of rooms for different purposes costs more than €40 million.

Out from fog. London is waiting for oligarchs from Eastern Europe  | Photo 2 | ee24
Kensington Palace Gardens – the most expensive British street

Real estate on Bishops Avenue is expensive, but for London it is not the limit. Most exclusive street of England is considered to be the Kensington Palace Gardens, where the house costs about €42 million that is 150 times more than the average home price in the UK. The second most expensive street in London is Boltons, which villas are sold for €27 million, the third is Grosvenor Crescent, where you may buy a house for €22 million (a complete list of the most expensive streets of English can be found here).

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"The use of offshore companies for the purchase of real estate in London is beneficial due to several reasons"
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Capital outflows from Russia and other countries occur, of course, not in the form of money export in suitcases or payments via personal bank accounts but through offshore structures. Adam Challis, Head of residential research in JLL, says that he was surprised by the number of people purchasing homes through the corporate vehicle. However, the use of offshore companies for the real estate purchase in London is beneficial due to several reasons. First, it can protect from sanctions. In case of sanctions and freezing assets, such property will be protected as much as possible. Second, privacy is preserved here: not everyone wants to have their name put in the land registry and from there along with the address – on the media pages. It is quite simple to hide behind the company name: the names of those who actually own real estate recorded on a legal entity and lives there, are practically impossible to discover.

Out from fog. London is waiting for oligarchs from Eastern Europe  | Photo 3 | ee24

And all this despite the tightening of the authorities requirements. While they are unable to legally affect offshores they have to call for the mechanisms of financial pressure. Property in London, owned by companies is taxed since the year before last due to the position of Chancellor of the Exchequer (The Finance Minister) George Osborne.

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"David Cameron is going to fight against "a touch of secrecy" at the real estate market that leads to tax evasion and corruption"
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But it does not help. What is the tax when it is possible to anonymously buy a house in London and keep the savings? Richard White, head of UK real estate at advisory firm KPMG, says that the desire to keep the name in a secret is often associated with the political situation at home land of buyer – in Russia or in other Eastern European countries.

Out from fog. London is waiting for oligarchs from Eastern Europe  | Photo 4 | ee24

Recently it was reported that British Prime Minister David Cameron is going to fight against "a touch of secrecy" at the real estate market that leads to tax evasion and corruption. Now the issue of disclosure names of owners of British companies’ is discussing. However, according to some experts, law- attempts will not bring any benefits as foreigners in this case will simply choose not British but foreign companies from "tax havens", who know how to keep a trade secret.

Text: Kyril Ozerov, ee24.com, based on Financial Times materials