International Policy Digest

World News /10 Jan 2020
01.10.20

The People’s Government Should Bring London back into Reach

The soaring property prices in London over recent years has been well documented.

In 2020, prices have reached a level that excludes all but the most wealthy from purchasing property across vast swathes of the capital. Natural growth in demand has not explained the stratospheric price increase which is exacerbated by the influx of foreign money, some of it unexplained, and a large amount from Russia and the former Soviet Union.

The UK, and London in particular, has long been a target for foreign investment. This is a huge advantage for the UK and facilitates the dynamic economy that underpins economic growth.

However, the economy has been artificially distorted by the concentration of the world’s richest who are drawn to the capital. Some of these foreign owners are purchasing property with wealth that is, at best, ‘unexplained,’ and at worst said to be acquired through allegedly criminal activity. As a result, British people struggling to get on the housing ladder are being frozen out of the market unfairly by other individuals beyond the sight of the British justice system.

The newly elected “People’s government” of Boris Johnson is making a concerted effort to present itself as on the side of working people and level up opportunity across the nation. Whilst the primary focus is on the often overlooked north of England, there is room for leveling up in London too, particularly in relation to the property market. Whilst legitimate investment should be encouraged the amount of foreign criminal wealth in London skews the property market. London Mayor Sadiq Khan has vowed to provide more transparency in the market, with an investigation currently underway.

There are various examples of London properties owned by individuals with what some have called “opaque” sources of wealth. One is said to be Dmitry Firtash, a Ukrainian oligarch with close links to Vladimir Putin who has been charged with conspiracy and is fighting extradition to the United States. He owns several properties in London including the defunct Brompton Road London Underground station for which he paid a reported £53 million. As reported last March by various media, including the Kyiv Post, his property in London was seized as part of a provisional measure at the request of VTB Bank which was seeking the payment of loans.

There are numerous other individuals in the UK who, it has been argued, should be subject to attention. According to the UK’s Independent newspaper, the Russian businessman Vladimir Makhlai has lived in London since 2006 and last July, it was reported that a Russian court sentenced Makhlai, the former head of the world’s largest ammonia producer TogliattiAzot, in absentia to nine years in prison for allegedly embezzling roughly $1.5 billion dollars. He denies any wrongdoing.

It is argued that the UK authorities should, generally and across the board, look rather more closely at the ownership of properties across London and make it clear that the city is not a “safe haven” for anyone. In the first instance, the government should make more use of Unexplained Wealth Orders (UWOs) to compel individuals to account for their wealth. However, this should just be the first stage of the process – the authorities should not be afraid to pursue these individuals further and permanently deprive them of their assets.

It is essential for the UK to strike a sensible balance that encourages investment from legitimate sources whilst discouraging those who have acquired their wealth through criminal activity. This is not simply a matter of legality but one of fairness. It could be said that the presence of some individuals in the UK distorts the economy and freezes people out of the property market. Although it rarely attracts headlines, it has a corrosive impact on UK society and should be tackled.