Thursday, March 3, 2016

London Bubble Trouble – Visas Issued to Wealthy Foreigners Plunge 84%

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It appears the music may have finally stopped for one of the world’s largest luxury real estate bubbles: London.
It’s well known that foreign oligarchs love London real estate as a means to launder funds, typically “earned” by soaking their host countries dry via corruption and fraud. This has caused absurd and irrational spikes in high-end residential real estate in the English capital, as well as a flood of new construction.
With emerging markets now completely collapsing, the seemingly endless flood of foreign money is drying up, and with it, London real estate.
So has the London real estate bubble popped? Probably.
– From the September 9, 2015 article: Luxury London Home Sales Plunge 26% – Has this Mega Real Estate Bubble Finally Burst?
London’s luxury property bubble seems to have popped sometime during the second half of last year, something I’ve written about repeatedly over the past several months.
One of the primary drivers behind the weakness in this “asset class” is a sharp reduction in the numbers of foreign criminals laundering money via London real estate. Just in case you still harbored any doubts about high-end London property being little more than bank accounts for shady foreign oligarchs, we learn the following from Bloomberg:

The number of wealthy investors granted visas to live in the U.K. fell 84 percent last year after the government doubled the minimum investment required for the permit to 2 million pounds ($2.8 million) in November 2014. New checks that mean applicants have to go through anti-money laundering due diligence checks may also be restricting demand, according to Transparency International U.K., a non-profit organization that monitors corruption. The decline in the number of people being granted the visas may be bad news for developers. There are plans to construct more than 25,000 luxury properties in the city over the next decade, according to data compiled by consulting firm Arcadis.
It’s pretty simple. Take away the criminal money and London luxury real estate has no where to go but down. For example, check out the following excerpts from a different Bloomberg article titled, Luxury Home Prices in Central London Fall Most Since June 2009:
Home prices in the best areas of central London fell by the most since June 2009 in the six months through February as turmoil in financial markets and higher taxes deterred buyers.
The decline in the 15 districts defined as the capital’s prime areas was 0.6 percent, according to London-based broker Knight Frank LLP. In Knightsbridge, home to the Harrods department store, values dropped by 7 percent in the 12 months through February, while there was a 3.3 percent fall in South Kensington and a 2 percent drop in Chelsea.
Vendors lowered asking prices on 39 percent of homes in central London since they were first offered for sale, according to data compiled by researcher Lonres in January. 
It’s not going to be pretty.
For prior articles on the topic, see:
Tens of Thousands of Properties to Be “Dumped” on London Real Estate Market by 2017
Luxury London Real Estate Prices Plunge 11.5% Year-Over-Year
Luxury London Home Sales Plunge 26% – Has this Mega Real Estate Bubble Finally Burst?
The Luxury Housing Bubble Pops – Overseas Investors Struggle to Sell Overpriced Mansions
UK Think Tank Proposes Law to Restrict Foreign Oligarch Real Estate Speculation
In Liberty,
Michael Krieger

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