Retreating roubles
The chill in Russian-UK relations is likely to lead to a significant number of Russian investors retreating from their London property investments, claims a new study from InvestorSquare. It says UK investors should be ready to face the problems and the opportunities this potential mass exodus presents.
As Putin’s favourite oligarchs take their roubles out of the UK economy in the wake of the crackdown on Russian business activities following the Salisbury spy poisoning scandal, a new study reveals there could be many new opportunities for UK investors.
In his new report on the potential impact of the new chill in relations, the founder of property investment site InvestorSquare, Ross Kelly, says: ‘As what some political analysts are calling a ‘second Cold War’ opens between Britain and Russia, a number of extremely desirable London properties are likely to return to the market, as Russian investors cut their losses and pull out of ‘Londongrad’, while wealthy billionaires may also be preparing to quit their Surrey country ‘dachas’.
Explains Ross: ‘Though Prime Minister Theresa May says she is not targeting Russian private citizens in the UK, following the Salisbury spy poisoning case, plans are underway for greater monitoring of private jets and freight, alongside new powers to stop people at borders. Significantly the UK has also announced a review of 700 visas granted to wealthy Russians who were given permission to come to the UK before 2015 under the investor visa scheme, in which they promised to invest £2 million or more. The potential loss of these investors is likely to have repercussions.’
The new report reveals some huge investments made by Russians in the UK, says Ross: ‘Prominent Russian figures with ties to the Putin regime own British properties worth at least £1.1bn, mostly in London, although the true value is likely to be far greater. In 2013 alone Russians came top of the list of foreign buyers of £1m-plus London homes, spending over £500m. Between 2007 and 2014, Russian investors snapped up UK real estate at a staggering rate. By early 2014 almost 10% of all money spent in property in London was Russian.’
It’s not just luxury London penthouses and mansions that will be impacted, reveals Ross: ‘Russians are also significant investors in ongoing property developments across the UK. Their potential withdrawal from these investments is both a threat to some much-needed developments, and an opportunity for UK and other non-Russian investors to pick up on these investment prospects.’
Ross believes that there has been a significant shift in Russian investments in recent years: ‘It is far from the case that most Russian property investment here is the result of ultra-rich oligarchs laundering shady money. It’s a stereotype long past it’s sell-by date. The truth is that in recent years, many Russian investors, whether super-rich or of far more modest means, were legitimately investing in UK property.
‘They saw investing their hard-earned roubles in British developments and properties as safer than leaving it in Russian banks. And many Russian buyers had recently become increasingly interested in commercial as well as residential assets.’
Explains Ross: ‘Russians may have started playing the property market by simply purchasing a second home, but there was noticeable move towards more lucrative commercial developments in recent years. For example, our report reveals a private Russian buyer acquired the City Edge student accommodation block in Birmingham from Shaylor Holdings for £10.6m in March.’
Concludes Ross: ‘The result of these retreating roubles may go in two ways. Britain may lose some cash-rich investors funding much-needed new property developments; but there may also some significant opportunities to snap up some unexpected properties at lower than usual prices: from Hyde Park stores to Kensington mansions to Birmingham student flats. It is an ill Cold War wind that blows no one any good.’
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