Home / Current Affairs / Patrick Gower: Russians quit London luxury homes as only super rich stay

Patrick Gower: Russians quit London luxury homes as only super rich stay

Wealthy Russian homebuyers are vanishing from London after driving a wave of foreign investment that lifted property prices to records. Only the oligarchs persist.

The number of Russians registered through Christie’s International Real Estate to buy homes in the city dropped by 70 per cent in a year, said Giles Hannah, the broker’s senior vice-president. That has led to a plunge in offers for properties priced at less than £10 million pounds ($ 16 million) as it becomes more difficult for all but the wealthiest to take money out of their home country.

“The banks are limiting what they can withdraw and we’re expecting further impact as sanctions kick in,” said Hannah, who advised Russian families on £180 million of London property deals in the past two years. “The oligarchs are still spending. They already have banks or lawyers over here that allow them to make purchases.”

Russia is struggling to reverse a rout in the rouble with emergency measures including 7.5 percentage points of interest rate increases and more than $ 10 billion of rouble purchases as President Vladimir Putin confronts the country’s deepest financial crisis since 1998. A drop in Russian buyers is hitting a London luxury-property market already buffeted by economic uncertainty in the UK and taxes introduced by Prime Minister David Cameron’s government this month.

Buyers ‘eliminated’
Russian buyers have been “eliminated virtually overnight,” said Andrew Langton, chairman of luxury-property broker Aylesford International Estate Agents. “Those that are still here have money out of Russia and won’t be taking it back in a hurry.”

Russians were the biggest buyers of London’s luxury homes between January and July 2013, according to Knight Frank LLP. They dropped to third during the first six months of this year, behind Italians and French purchasers, the broker said.

Russia has been hurt by sanctions against businesses run by allies of Putin imposed after the country’s March incursion into Crimea in Ukraine. The latest round of US actions, on September 12, targeted OAO Sberbank, the country’s largest lender, as well as energy firms and five state-owned defence and technology companies.

The rouble has sunk 16 per cent against the dollar this month even after posting an 11 per cent rebound yesterday, after the finance ministry pledged to use as much as $ 7 billion to support the currency and the central bank announced measures to help companies refinance looming foreign-currency debt. Putin at a news conference criticised the central bank for not acting faster to support the rouble, which is down 44 per cent this year.

Money worries
“You’ll also see a reduction in those trying to buy yachts and smaller items because they’re nervous about their money,” Hannah said. “They’ve got to keep hold of their cash.”

Home prices in London’s wealthiest neighbourhoods fell on a monthly basis for the first time in four years in November, according to Knight Frank. Annual price growth slowed to 6.1 per cent.

Changes to the UK’s stamp-duty sales tax mean buyers of a £5-million home would pay a levy of £513,750, an increase of almost £164,000, according to government data.

“The sanctions are really beginning to bite on expensive property in London, on top of all of the tax which the government introduced in the autumn budget,” Langton said. “It’s killed the golden goose.”

French focus
The story is different for the oligarchs, a group of the richest Russians who have thrived since the fall of Communism. Russians accounted for 21 per cent of home purchases worth more than £10 million during the six months to October, up from 13 per cent in the prior six months, Knight Frank LLP said in a report November 25. Those that continue to shop for homes are targeting London, Paris and the French Riviera, according to Hannah at Christie’s.

“The heyday of the Russian buyer was probably two years ago and it’s been declining ever since, although there was a bit of buying as a result of the Ukraine crisis,” said Robert Bartlett, chief executive officer of broker Chestertons. “There’s now a broader influx of Indian and Middle Eastern money that is having a bigger impact on the London market.”


© Bloomberg

Leave a Reply

x

Check Also

Pakistan players target first World Cup win against India

If you talk to any Pakistani player ahead of Sunday’s clash against ...

Sunanda case: Tharoor quizzed once again

Congress MP Shashi Tharoor was today questioned by the Special Investigation Team ...