How Corrupt Is The Property Market In Your Borough?

Rachel Holdsworth
By Rachel Holdsworth Last edited 38 months ago
How Corrupt Is The Property Market In Your Borough?

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36,342 properties in London — covering 2.25 square miles — are held by offshore tax haven companies, according to research from Transparency International (TI). Nearly a tenth of properties in Westminster are owned by companies registered in secretive jurisdictions, which raises questions about who really owns them and where the money came from.

High prices in the London luxury property market are attractive for ill-gotten gains — cash can be 'parked' in a Mayfair apartment and then moved elsewhere with little risk of losing value. A booming market is actually useful for money laundering, says TI; the higher the price, the more money can be legitimised that way.

Of those 36,342 properties owned by companies in secrecy jurisdictions, 9.3% are in Westminster and 7.3% are in Kensington and Chelsea. The by-now-legendary Vanity Fair article on One Hyde Park noted that 59 of the 76 apartments sold at the time were held by companies registered in offshore tax havens. That doesn't mean all of them were bought with dodgy money, but it does mean we have no way of knowing for sure.

Money laundering is when the funds from illegal activities are funnelled into legitimate looking corporate structures, usually in domains that let companies be run without disclosing who's really behind them. Not all companies incorporated in places like the British Virgin Islands or Jersey are for criminal purposes — hey, some are 'just' for good ol' tax avoidance — but the misuse of these kinds of companies is extremely common because of the ease with which they can bypass anti-money laundering checks when investing here. So we should be highly suspicious that so much London property is owned by mysterious figures, particularly when corrupt and illegal activities help perpetuate global poverty.

The effect of corrupt money on London's property is to help raise prices, which can affect prices further down the market in a ripple effect, and encourages developers to build more of these luxury pads for investment rather than concentrating on the homes London genuinely needs. To combat this — and to make sure London isn't a haven for the results of corruption — Transparency International recommends that any foreign company intending to hold a property title in the UK should be held to the same standards of transparency required of UK registered companies. Sounds simple enough. Let's see if it happens.

Last Updated 04 March 2015

Mike Paterson

Massive stamp duty for overseas buyers would be a very good start. The vendor can cop some duty too if he sells to an overseas buyer. Take that. Then huge council tax on empty properties.

Paul Soper

These
properties are all caught by what is called the ATED - the annual tax
on enveloped dwellings worth more than £2,000,000 which is really a
mansion tax for residences held inside companies, onshore and offshore
and paying between £15,400 and £143,750 per annum per property. From
April 2015 this will become between £23,350 and £218,200 and the band
will extend down to £1,000,000 where they will be paying £10,900 per
annum. In the first year 13/14 Osborne reported that they collected 5
times as much of this tax as they estimated. From 2016 the limit will
go down to properties worth more than £500,000. This makes Ed Balls
Mansion Tax look like the fraud it is as these properties are already
paying far more than Ed hopes to raise. Is he unaware of this? It's a
pity these stories don't point out the whole truth isn't it. Add to this the fact Stamp Duty Land Tax is paid at 15% on the whole of the value placed into a company where residential property costs more than £500,000. Oh, and from 6 April 2015 onwards all overseas landlords owning residential property, regardless of value, in the UK will become liable to Capita Gains Tax, at the moment they are exempt.

James Guppy

HMRC is at the heart of the rot - they have the powers to request Jersey authorities to provide underlying beneficial ownership for everything registered there - why don't they do it?
Well, have you noticed how many HMRC officials graduate from the school of tax avoidance (the other name for HMRC) and go and work for companies and practises that utilise "tax efficiency" to give it the title that I've heard applied to it.

James Lauder

It's a disgraceful situation for real Londoners, people that work hard and pay into a system that makes the country a success. These same people are being priced out of the market in these locations due to this external foreign (and often corrupt) influence. Coupled with the affordable housing situation created over the past 10 years, it's a very unjust place to be. With sites like http://www.lockdown12.org/ petitioning and unless, like Mike states, a change is made it will only get worse over time.

Guest

Tax land values and end useless damaging speculation be it with dodgy money or otherwise, the land market is a pyramid scheme which collapses about every 18 years and is entirely dysfunctional in this country. Housing should be created for people to live in, not as a store of value to parasite of the rest of the economy.

LeeHazelwood

Tax land values and end useless damaging speculation be it with dodgy
money or otherwise, the land market is a pyramid scheme which collapses
about every 18 years and is entirely dysfunctional in this country.
Housing should be created for people to live in, not as a store of value
to parasite off the rest of the economy. Every improvement made in the area paid through tax money increases the value of these 'assets' as an externality. We are in essence subsidising the richest while simultaneously squeezing the poorest via austerity.

Beth Williams

Just abolish tax relief on interest paid on all residential mortgages. Currently the taxpayer is subsidising the owners of buy-to-let mortgages. Absolutely insane.

PB

Transport For London is now involved in an offshore company in Jersey to channel profits along with Capco and the Kwok Brothers ( recently convicted in Hong Kong) from the £12 billion Earls Court development. Capco still has their agents out during the evenings threatening local residents and small businesses and telling them to sell up or they will make sure they are compulsory purchased so they can expand their scheme to the surrounding area and Capco have started buying up properties in the surrounding streets one by one thinking people will not realise what they are doing. And RBKC has decided to relax it's planning rules so they will allow offices and hotels in Earls Court (not other parts of the borough only Earls Court) to be turned into residential basically so the developers can continue to force existing people out to make way for the expansion of their luxury flats. The residents of the mixed ownership and council estates they are going to knock down have been told they will get the purchase price plus 10% compensation if they buy a flat In the new development, that's flats that start at around £750k ???, the whole thing is disgusting

Kay

We always suspected this, London is a known shop front for the world's richest. And nobody really wants to stop this, because it brings way more good than bad into the city's economy. Sure, you hike the rent and property prices for generations to come and alienate entire social classes and prevent them from living in the city they grew up in. And sure, you live on that morally grey area of allowing what might even been money funnelled to the likes of terrorist organizations and corrupt dictators. But the flip side is the city becomes global, powerful, outwardly and will create positive ripple effects across the UK economy.

It's controversial, I dont necessarily like it and neither should you. But in the wider scheme of things, this happens for a reason, and everybody who has power in London is in cahoots one way or another. Look at it this way - why is it that London brought the Olympics home, look at the other cities, Rio, Moscow, Beijing ... errr yeah, these are all clean cities cutting down on corruption and dodgy activities...

The truth is, London as a city benefits from having powerful people investing here. But the other truth is, London is selling its soul to the devil.

adam

Warren Buffet: “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” ... there is nothing more to say...

ladolcemar

Interesting Barnet punches way above its weight in your property 'corruption' index - especially as the Council has cut the council tax which has no impact on the wealthy inhabitants or property owners (£27 annually i the pockets of residents of Bishops Avenue) but deprives children of essential services like libraries. Barnet proposes to close more than 40% of its libraries - despite increased usage of average of 20% greater borrowing - to sell off the property...presumably to offshore investors? How's that for government? savebarnetlibraries.org