House prices in London could be forced down by a National Crime Agency crackdown on overseas ‘dirty money’ invested in property, experts say.
Last month the NCA flexed its muscles on the issue by imposing new powers to freeze ownership of two properties in London worth a total £22m. The NCA’s Unexplained Wealth Orders force the overseas owners of the properties to prove they were bought with honestly earned money. If the owner cannot, both will be seized.
The move is the first time UWOs have been used and follows political concern the UK could be used by overseas criminals to invest cash.
NCA director for economic crime Donald Toon says UWOs will reduce this appeal.
He says: “They enable the UK to more effectively target the problem of money laundering through prime real estate in London and elsewhere.
“We are determined to use all of the powers available to us to combat the flow of illicit monies into, or through, the UK.”
But property experts say the move could fuel the slowdown in house prices. John Charcol senior technical manager Ray Boulger says: “On the basis that we have already seen the impact on the top end of the London market from regulatory changes, such as much higher stamp duty, it is apparent these things can have quite a big impact.”
Boulger says the move will discourage overseas criminals from investing in London, and will encourage existing criminal owners to sell up, both factors helping to suppress overall house price figures.
London Money director Martin Stewart agrees: “A portion of the exponential growth that prime London house prices have seen over the years will have been caused by the parking of money generated from dubious sources. It is only right that this should be addressed.”
E.surv director Richard Sexton says it depends on how serious the issue of dirty money is.
He says: “I guess it depends on what proportion of the current market might be identified as ‘dodgy’ in some manner. By definition, its almost impossible to quantify.”
But the NCA’s actions could further drive down prices by deterring legitimate overseas investors, Boulger adds.
He says: “ If you are a genuine buyer and you want that type of asset, and you see that the market is buoyed up by people with dirty money, then actually you might take a less bullish view of the market.”
Others are less certain. Sexton says: “It shouldn’t put off bona fide investors, and I still hear anecdotal evidence of potential investors from the far east undertaking tours of London with a view to buying into new build, for example.
“London is truly a global city and remains a safe haven for money from areas which are less stable around the world – so I think on balance, whilst it would deter a proportion, there are larger drivers which will secure the long-term fortune of Greater London.”
House prices in the capital have been falling slowly over recent months due to factors such as fears of an interest rate rise and existing high property prices.