News from the Halifax this week that the combined values of the residential properties in London amounts to £1.13 trillion, virtually double that of all the homes in Scotland, Wales, and Northern Ireland put together, emphasises why London might be such a good place for laundering money through residential property purchase.
So the newsflash from Estate Agent Today on Tuesday that the NAEA is pressing for Government action on four fronts to combat money laundering through property sales and purchase brings news that is also highly relevant.
When there are such vast amounts of cash locked into London property and demand, both legitimate and possibly not, drives up values it’s easy to see how buying prime London homes is a better way of laundering dirty money into clean cash that using the money to buy other assets that are then sold pre-owned at a loss.
The Channel 4 film From Russia with Cash started the alarm bells ringing but regulators such as HMRC were probably equally alarmed by the meeting between them, NAEA, the Trading Standards regulators of estate agency, and London agents that I reported on in my September column. You may remember that some agents were alarmed that they should have to implement money laundering checks when they were acting as sub-agents in the sale because the checks should already have been done by the main agent. Taking that line misses the point that all of us involved in the transaction have to be certain of the bona fides of all the individuals involved.
NAEA is likely to be even less popular with London agents who question if they should have to carry out background checks on property buyers and sellers when doing sub-agency deals now that it has come out firmly, and correctly, on the side of the enforcers. What amazes me most is that taking this line should even be necessary.
It’s in all our interests to comply with the rules. NAEA and Transparency International, which jointly issued the demands for the four improvements to the sales and purchase process, says money laundering in London could be distorting property values in the wrong direction.
That may be good news for fee earners while the joyride continues but, like most joyrides, it will end with a sickening crash that will distort the market by reversing value gains.
The last thing the market needs is a London price correction that ultimately spreads like some pernicious virus through the rest of the southern England market. If the NAEA has to become the estate agency equivalent of virus protection then so be it.
I hope that its stance will be taken in the right way and that all agents handling London sales will perform their duties under the money laundering rules with genuine diligence whether they are the main or sub agent.
As estate agency in general tries to convince the public that as an industry we are improving our standards and offering a genuinely professional service to our clients, we need to be cleaner than clean.
With 10 per cent of properties in Westminster owned by anonymous offshore companies, some of them legitimate and maybe some of them with assets housing MPs, let’s hope that the incumbents of the Palace of Westminster, hopefully still under legitimate UK ownership, take heed of the message and tighten the screws on the “owners” of the dirty money.
*Colin Shairp is director of Fine and Country Southern Hampshire