Could the UK’s property market be affected by the proposed sanctions on Russia? Let’s not get hysterical, says Trevor Abrahmsohn…
Through the reforms of the 80s, spearheaded by Thatcher, London started to shed the shackles of its socialistic past by getting rid of exchange controls and deregulating a plethora of byzantine systems and traditions, whilst it embraced the new age technology of the 21st century.
The time zone and geographical location of this great city of ours between the East and West gave us a unique advantage and whilst back then financial services were restricted to insurance it is today an all embracing frenetic hub where more IPOs take place than anywhere else in the world.
Whilst the Europeans were building their “European experiment” with its fulcrum in Berlin, they naturally thought that this would vastly over-shadow London and its “little Englander” Sterling currency, but they couldn’t have been more wrong.
In the early 20th Century the United Kingdom was the greatest “power on earth” and as a direct result of its former imperious exports of culture, judiciary and customs throughout the world there is a natural desire amongst the wealthy and resourceful of these former colonies to own a part of the “mother land” by buying one or more properties in London.
Not only are these investments fiscally efficient but they are in a hub that is today’s cutting edge of cuisine, couture and culture, where the centres of excellence are all in conveniently in one place; this combination is unique amongst the metropolises of the world.
Residential property over the last forty years has been a consistent performer and is probably the most robust sector in the world, recovering the fastest after recession.
Every time there has been an explosion of wealth or political unrest the upper middle classes have gravitated to London
History has shown us that, as a result of these motivations, every time there has been an explosion of wealth (usually as a result of a hike in the oil price) or political unrest, the upper middle classes of these regions have gravitated to London.
It started with the Greek King being ousted from Greece, the Shah from Iran, the wealthy Arab Sheiks from the Middle East, the Chiefs from Nigeria and more recently the oligarchs from the former soviet satellite countries, as well as the Chinese.
The Arab Spring was a recent illustration of this effect and the current problems in the Ukraine are following the same pattern.
It is true that many of the wealthy Ukrainians have already bought one or more properties in the Capital but this uprising is producing many more.
Do we benefit from this inflow of capital? Yes, we certainly do. These wealthy oligarchs bring much needed foreign earnings, employ UK workers, buy UK goods and run businesses from this country that employ UK workers. They are wealth creators and we should encourage them.
If sanctions are imposed on Russia I would expect many more wealthy oligarchs to invest in the UK. I would find it inconceivable to think that the assets of individual Russians would be frozen by the UK government, working with Europe and the USA, since private entrepreneurs are completely independent of the nation state. The only sanctions that would affect Russia would be arms, technology and the purchase of their energy resources that is their primary source of revenue. Germany would need to find an alternative source of gas to make this effective.
Let’s not get hysterical about the impact on London property that, hopefully, will continue to thrive.Trevor Abrahmsohn is Managing Director of Glentree Estates glentree.com Views of Contributors are not necessary those of PrimeResi or its Publishers Image: Russian Embassy on Kensington Palace Gardens by Kevin Thompson (CC BY 3.0)