RIA Novosti: "Grey" capital from Russia has inflated a real estate bubble in London.

Measures to tighten transparency conditions for companies, currently being considered by the British authorities, could deter honest foreign investors, according to experts. Stable growth in property prices in the UK has been observed for the past 15 years, which, according to experts, is due to high demand, particularly from individuals from Russia, who use this as a way to conceal illicit capital through anonymous one-day companies. Measures to tighten transparency conditions for companies currently being considered by the British authorities could scare away honest foreign investors, experts believe. Grey does not mean dirty Yesterday, British Prime Minister David Cameron said, "The United Kingdom should not become a safe haven for illicit funds from around the world." The Prime Minister complained that today British, and especially London, property is being purchased by individuals from abroad through anonymous one-day companies, some of which operate with stolen or otherwise illegally obtained funds. Cameron stated that he wants the UK to be the most open country for investment in the world, but he needs to be sure of the cleanliness of the money. In connection with this, he plans to begin consultations aimed at achieving transparency in the process of determining the owners of property. In particular, in the coming months, the names of the owners of about 100,000 properties will be established. Dmitry Zakirov, a partner at London's elite real estate agency LonGrad, notes that the discussion generally pertains not to "one-day companies," but to companies specifically created to purchase real estate. "The authorities have long paid attention to this and 'burdened' such market players with a high tax - 15%, while also adding an annual tax," Zakirov said. Another issue is that many beneficiaries prefer to remain undisclosed and pay "to the maximum," but this may be due to tax optimization on inheritance or personal motives, as well as the political situation in the investor's country. This does not necessarily imply crime, emphasizes Zakirov. Russian factor Nevertheless, experts still do not deny the existence of real estate on the market that has been acquired in order to conceal illicit capital. It is no secret that many Russian oligarchs buy real estate in London to hide their assets, says Ekaterina Rumyantseva, Chairman of the Board of Directors of Kalinka Group. According to her, there is an opinion that a third of the illicit funds circulating in the country have roots in Russia or Ukraine. Vladimir Rozhankovsky, Director of the Analytical Department of the investment company EuroInvest, adds that it was the Russian "grey" capital that played a major role in inflating the price bubble in London from the 2000s, where the majority of investor demand is concentrated. He notes that this concerns the segment of classic and elite real estate, which has become the most expensive in the world within the boundaries of "Greater London." "The economy-class segment, known as 'communitis' and 'developments,' is unattractive to foreign capital, and prices there are relatively stable," adds the expert. Rumyantseva points out that property in the UK has been consistently rising in price. "For example, just in June, compared to the same period last year, prices in London rose by almost 10%, and in Oxford and Cambridge, the growth was over 10%," she says. Property in the central premium areas of London has long been inaccessible to most native English people, which is why many live in more budget suburbs, adds Marina Kuzmina, Head of the International Real Estate Department at Knight Frank. Experts say that such growth is explained not only by the influence of investors from Russia. Rozhankovsky adds to the list of unscrupulous Chinese millionaires who today, in many ways, follow the example of Russian wealthy individuals.

In turn, Colliers International partner Vladimir Sergunin points out that the British real estate market is popular among wealthy clients from BRICS countries. "People and companies in these countries earn a significant amount of money, but they may not always be confident in the economy, so they diversify their risks by investing a portion in their own countries and around 30% in foreign real estate," explains the expert.

He adds that this way they protect their investments due to the constant market growth. "Returns on invested capital in assets here are higher, ranging from 4 to 5.5-6%. In Switzerland or Austria, it's 2-3%. The returns are higher, the risks are minimal, and the market is easy to manage," points out Sergunin.

Suspicious money

However, the authorities in Britain have long been fighting against "shadow buyers" who purchase luxury London homes. Russian capital in Britain is now treated with triple skepticism and bank accounts are often frozen for verification, says Rozhanovsky.

Kuzmina from Knight Frank notes that about 80% of clients register properties in their own names and fully disclose their income.

"Money laundering procedures have been tightened for quite some time: lawyers thoroughly check each buyer, and even a deposit of £10,000-£20,000 without proper documentation cannot be transferred, while in the past it could be done with a card. If a buyer cannot provide all the requested documents to the lawyers in sufficient quantity, the transactions simply do not go through," she explains.

Rozhanovsky adds that Chinese capital is also not very welcome in Britain.

"If the Chinese stock market drops for a long time and the avalanche of Chinese money shifts from Chinese stocks to British palaces and castles, British regulators will undoubtedly introduce stricter and multi-step buyer verification procedures," he says.

A remedy for dullness

If the British authorities further tighten legislation in the real estate sector, it could lead to an outflow of foreign capital from the country, warns the Knight Frank expert.

"Measures must be very well thought out in order not to scare away foreign investors too much, as their share is the majority, especially in the luxury segment, and has a significant impact on the country's economy," she says. The expert cautions that making the process of verifying property ownership transparency more complicated may drive away completely legitimate buyers from the market.

"Investors who cannot provide the necessary volume of documents or whose history and biography raise doubts among owners, developers, and lawyers may be at risk," she says.

According to Kuzmina, it is still difficult to say how all of this will affect the market. "Perhaps there will be a short-term stagnation, but the demand for the UK is still high," she believes.

Rozhanovsky adds that the disclosure of well-known names alone does not provide any proof. According to him, the Scotland Yard often investigates large sums of money transferred to banks from offshore accounts, but in half of the cases, its officers cannot prove the "money laundering" nature of the origin of the capital used to acquire properties.