There was much fanfare last week as our beloved leader, David Cameron, vowed that he would rid London of the scourge of “dirty money”.
Yes, London has become the mecca of money laundering according to those in the know.
Except it is evident that they don’t really know. Or that they do know but have decided that the soundbite is more important than the facts. After all if they are seen to be tackling the criminals who are swarming all over the London property market, house prices will once again drop to more affordable levels and Cameron et al will become heroes…
Unfortunately this is rubbish, drivel and claptrap and I said as much when I was interviewed by LBC Radio last week.
Cameron and the Dirty Money Brigade are basing their crusade on hearsay backed up by some rather feeble figures. But firstly let me be absolutely clear about something:
I can guarantee money-laundering does happen in the London property market.
However, I can also guarantee that this also happens in Paris, New York, Toronto, Milan, Barcelona, Berlin, L.A., etc., etc.
However, to suggest that the practice is rife in London and that it is driving up prices is fantasy.
Cameron’s “evidence” is based on the belief that the use of offshore companies indicates foul play. It is estimated that there are c. 100,000 UK properties held in offshore companies. Roughly 30,000 of these are in London. This may sound like a lot.
However, HMRC has just released its housing market figures for June 2015, which show that there were 114,780 transactions in that month alone. In 2014 there were just over 1.2m transactions according to HMRC. So by their own figures, even if every property owned by an offshore company was bought last year, this would be under 10% of that year’s house purchases.
Of course, this didn’t happen. The purchases have been scattered over decades and even if the majority were over the last seven years it shows that it is a small percentage of the market.
But that is supposing that everyone who has used an offshore company to purchase a property is a criminal… and that their tax advisers and solicitors are also crooked as they are clearly not carrying out the necessary anti-money laundering checks.
Hell’s teeth, Britain is clearly rotten to the core! Alternatively, this is just a good headline grabbing story for the Prime minister…
The vast majority of the people who use off shore companies to buy property do so because it is prudent and legal tax planning. Tax planning measures are the unintended consequences of previous government/tax policies.
So in reality, the number of properties used to launder money is negligible. Should we be stopping this? Absolutely. But to suggest that this is a major problem and that it is forcing prices up is nothing short of absurd, so don’t expect a swathe of arrests and confiscation of property in the coming months.
The simple fact is that London attracts the wealthy and ambitious because it is a fantastic city. Unfortunately one of the side effects of this is that land, and therefore property prices, rise. This has been happening for centuries, which is why London has continued to expand upwards but mainly outwards.
However, the vast improvement in the transport infrastructure means that one has to now also think of London in terms of travel time rather than just geographic boundaries. For example, in 1900 travelling from Notting Hill to the Bank of England would have taken hours. Now it is a matter of minutes.
In a similar vein, Slough will soon effectively be part of London with the opening of Crossrail. Granted it is not as glamorous, but this is how one has to look at the evolution of London and the surrounding areas. And towns like Slough will change, just as Fulham, Clapham, Brixton, Hackney, Shepherd’s Bush and others have changed (people forget that Notting Hill was literally a pig sty).