The impact of Russia sanctions on London house prices

UK sanctions on Moscow oligarchs risk triggering a fall in property prices in London and beyond, analysts have warned.

Some pundits are predicting that wealthy Russians will “flee the property market in a panic” over government plans to seize some of their financial assets, Investment Monitor reported. As the fallout of the Ukraine war spreads, Westminister is proposing to grab the properties of oligarchs with Kremlin links and to reveal opaque holdings through a new register.

The investment news site predicted that “the UK will be slow to sell or seize” the estimated £8bn worth of Russian-owned property, businesses and other assets here, “£1.1bn of which is in London homes”.

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All the same, the billionaire owner of Chelsea FC, Roman Abramovich, is looking for buyers for his £150m Kensington mansion and Chelsea flat amid an atmosphere of “panic and uncertainty,” said the London Evening Standard.

In an article for The Spectator, Alex Marsh, editor-at-large at Spear’s wealth management magazine, said that “many high-net worth Russians might now be trying to free up capital by selling houses as sanctions hit”.

‘Ripple effect’

In a further blow to wealthy overseas owners, Home Secretary Priti Patel last month announced plans to scrap the UK’s so-called golden visa scheme in a bid to halt the flow of “dirty money” flooding into the UK from Russia.

The various crackdowns have fuelled speculation about a potential collapse in London property prices. The Telegraph pointed out that the “influx of Russian money was at one stage so large it was said to have fueled a 36.5% rise in central London property prices in 2007”.

However, some experts believe that even a major exodus of Russian money from the London property scene may not have a significant impact. “Russians leaving the UK property market would have no impact whatsoever,” said Edward Heaton, founder and managing partner of national buying agents Heaton & Partners.

Heaton told luxury property journal PrimeResi that although Russians have bought a significant amount of property over the past few decades, they were now “a small minority of buyers”.

Brazil, India and China have plenty of “billionaires with money burning holes in their pockets”, he added.

That assessment was echoed by Geoff Garrett, director of specialist mortgage broker Henry Dannell. He said that although more property might become available if Russians fled, and the “influx of stock is likely to depress prices in what are otherwise exclusive enclaves”, the “downward pressure on prices should be limited”.

But according to Marsh in The Spectator, “historically the capital acts as a bellwether for the rest of the country” and “the depth and breadth of Russian wealth in Britain is considerable”. So “we would be naïve not to expect to feel its absence if it starts to run”, wrote Marsh.

Such an absence could benefit some at the bottom of the housing ladder, however. The snapping up of expensive property has had a “ripple effect”, wrote Rowan Moore, author of Slow Burn City, in an article for The Observer.

“If billionaires buy in Kensington, then slightly less loaded bankers start to look in marginally less expensive districts, where the most successful professionals might be pushed further afield, and so on, until first-time buyers in outer boroughs find that their studio flats are a notch more pricey,” Moore said.