For three-quarters of Londoners under 35, owning a home in the capital remains out of reach. But according to the leaked Panama Papers, buying property in London presented little problem for associates of Bashar al-Assad, the Syrian president; for a convicted embezzler who is also the son of a former Egyptian president; or for a Nigerian senator facing corruption charges.

The leaks from the Panamanian law firm Mossack Fonseca have brought back into focus the ownership of London property via offshore companies by people suspected of corruption overseas — a phenomenon that has helped to shape the capital’s housing market, where prices are up 50 per cent since 2007.

 “We think it very likely that the influx of corrupt money into the housing market has pushed up prices,” said Rachel Davies, senior advocacy manager at Transparency International. Donald Toon, head of the National Crime Agency, has gone further, saying last year that “the London property market has been skewed by laundered money. Prices are being artificially driven up by overseas criminals who want to sequester their assets here in the UK”.

Since 2004 £180m of UK property has been subject to criminal investigation as suspected proceeds of corruption, according to Transparency International data from 2015. Yet this probably represented “only a small proportion of the total”, added the campaign group.

Most of these properties were bought using anonymous shell companies based in offshore tax havens such as the British Virgin Islands. Overseas companies own 100,000 properties in England and Wales, Land Registry data show.

Owning property through a company can present tax advantages but, depending where that company is based, it can also offer anonymity. According to Transparency International figures, almost one in 10 properties in the London borough of Kensington & Chelsea is owned through a “secrecy jurisdiction” such as the British Virgin Islands, Jersey or the Isle of Man.

“UK property can be acquired anonymously, anti-money-laundering checks can be bypassed with relative ease, and if you invest in luxury property in London you know your investment is safe. All that comes from the flaws in the UK anti-money-laundering system,” said Ms Davies.

David Fuller's view

Here is a PDF of the FT article.

This explains a lot (pun intended).  Now we know more about why London property has been largely immune from downturns experienced in most other cities. 

The evidence of so many empty houses in the quiet residential streets of Kensington & Chelsea and Westminster has long provided evidence that many property owners would not or more likely could not live here.  Nevertheless, the numbers are shocking if you look at the UK’s graphic: ‘Where purchasing companies were incorporated’. 

Will the government do something about this?  Chancellor George Osborne already is and I will follow up on this in Thursday’s Comment.