Tricky questions Flashcards
How much corrupt wealth is invested in UK property each year?
The NCA estimate tens to hundreds of billions of illicit wealth are laundered through the UK each year. Through open source research alone we have found over £4.2 billion worth of London property bought by individuals with a high corruption risk.
How do you define high corruption risk/money laundering risk? (referencing the 40% figure for the 14 London developments)
We used an initial mix of TI’s CPI as well as looking at whether property was bought with a secrecy haven. These factors give an initial indicator of risk, which can then be explored more on a case by case basis:
- Either anonymous company; or
- Investment came from a country with a score of 60 or below on the CPI
Aren’t there other reasons for overseas investment in London
Yes. There are many reasons people invest in London, this report looks at certain flows of wealth with corruption as a driving factor.
Capital flight is legal so what’s wrong with it?
There’s nothing wrong with legal capital flight itself, however it is often a symptom of corruption in the origin jurisdiction e.g. Rusia, China/, Arab Spring, Ukraine etc.
What is the difference between regular investment, capital flight and ‘crisis capital’?
Capital flight is when assets are moved in response to instability in another country. Crisis capital refers to a specific type of capital flight with instability caused by political risk and corruption as the root cause
Doesn’t London need overseas investment in property to build affordable homes?
Currently the system relies on overseas investment to fund the rest of projects, with some affordable homes being part of this. Overseas investment shouldn’t be relied on, there is enough demand for homes from those wanting to live in London.
Is this report xenophobic/racist?
No. This report poses a quandary for policy makers: how can you ensure the property market is not distorted by corruption overseas without unintentionally shutting out innocent investors?
Does the ‘prime’ London market have anything to do with the rest of the housing market?
Yes, if house prices at one end of the market rise this has an effect of pulling up prices in the rest of the market. Whilst much of what we focus on in the report is high-end property the knock on effects have consequences for the whole of London.
Are these 14 developments representative of the new homes being provided for London?
These developments show the high levels of luxury homes being produced for international investors whilst first time buyers are finding it difficult to get on the ladder.
Aren’t One Hyde Park and St. George’s wharf exceptions when it comes to empty homes?
No, there is emerging statistical evidence that underuse of homes in London is a common occurrence across central London and up towards more northern parts of London. More research needs to be done into this.
If public registers of beneficial ownership are brought in, won’t that drive criminals to use nominees and find ways around that?
Public registers of beneficial ownership expose criminality. Criminals may wish to try and get around this, but by having public registers this will make these attempts seem more obvious. It is far better to have these registers than not have them.
Empty homes: You say that empty homes are a problem in the capital, but actually less than 21,000 homes in London are classified as ‘long term empty’.
The true scale of empty housing is hidden by the way in which empty homes are recorded: 1) Owners who visit sporadically do not quality as ‘long term empty’ for tax purposes; 2) Not all long-term empty homes are reported to local authorities. Knight Frank states that London’s multi-millionaire (>£10M) population varies from 34K in Summer to 10K in Winter, meaning that 24K houses (in addition to the 21K) are probably empty for half the year. “These homes are essentially being used as hotels.”
How much of London (overall) does international investment take up?
A Hamptons report from December 2016 showed international buyers accounted for 29 per cent of the London housing market.8 In ‘prime’ areas of London – the most expensive, ‘desirable’ homes in central London – overseas buyers made up 60 per cent of the market.
What about Brexit? Don’t we need to open up to the world?
Because of the shocks to the currency, overseas investors are getting good deals on property so there’s been a rise in development.
If developers sold new build properties for less they’ll harm profits and put the whole development at risk.
The top 5 developers have increased their profits fivefold in the last 6 years, they can afford to deliver more affordable homes.
