The Super-Rich Just Get Richer
In August this year, the record for the most expensive UK home was breached yet again. The price: £140 million. The property: Park Place, a 300-year old, Grade-II listed mansion overlooking the Thames near Henley. Sitting in 200 acres of parkland and complete with trademark helipad and spa, the property’s buyer was an unidentified Russian.
After something of a lull during the depth of the downturn, the UK prime property market has suddenly burst into life. While the cost of an average house has fallen in real terms – by about 7 per cent - in the last year, Britain’s prime properties have been changing hands at an ever increasing rate. Top central London prices – from Belgravia to Mayfair - have hit record highs, rising 40 per cent since 2009. Driving this mini-boom has been a new surge of cash from the global super-rich looking for a safe haven for their money. According to Savills residential research, a heady £6 billion of foreign money has flowed into the prime central London market in the last year.
As a result, 17 of the 20 most expensive properties in the UK are now owned by the global rich. Of the top 20, 4 are owned by Russians, 3 by Ukrainians. Eight of the twenty have been bought from British owners or British property magnates in the last two years. It was the Russians who initially led the latest charge on the UK’s prime property market – just as they had in the mid-2000s. But in the last year they have been nudged into fourth place, overtaken by the Chinese and, according to the leading property agents, Knight Frank, investors from Malaysia and Hong Kong. While the Chinese forked out an average of £6.5 million, the Russians spent £5.4 million per dwelling.
Britainremains the favoured home for spare oligarch cash. And they still have plenty of it. The richest Russians took something of a hit when the international financial crisis first broke. With stock markets and commodity prices plunging, Roman Abramovich’s paper wealth shrank by a third in 2009. Oleg Deripaska was forced to sell off a good deal of his global business empire. Since then they have more than bounced back, with most of the Russian oligarchs sitting on fortunes higher than before the recession.
Today, the country boasts an estimated 101 Russian billionaires, the third highest after the US and China. This is almost double their 2007 count. This resurgence is not just true of personal fortunes in Russia. According to the American business magazine, Forbes, the number of global billionaires jumped by nearly a third in the four years to 2011, despite the deepest slump since the 1930s. Today some 1,200 people hold a collective wealth of some $4.5 trillion, giving them an economic punch equivalent to a third of the size of the American economy.
Moreover, over the last decade, much of this personal and mobile wealth, especially that of the Russians, has ended up in the UK. This is no accident. From the mid-1990s, the British authorities set out to lure the foreign rich – and their money - turning London in particularly into what Forbes has described as “a magnet for the world's billionaires". For a while from 2008, the money slowed. The oligarchs were tied up in trying to rebuild their financial empires. But now it seems the money is starting to flow again. Aided by the falling pound and the growing political and economic uncertainly across the globe, the world's super-rich are, as one property agent put it "coming out of hiding – on the hunt again for bargain trophy assets in the UK”.
We are still some way from the frenzied foreign spending power of the boom years with multiple bidding wars for the most expensive mansions or the tear away prices for private jets and record profits for New Bond Street retailers. But the Russians are creeping back. Moreover, the Russian economic muscle is now being felt in a largely uncharted quarter – the top end of the London stock market.
At the beginning of November, Polymetal – a huge mining conglomerate, and Russia’s fourth-largest gold miner, with a market value close to £4 billion – became the first Russian company to join the FTSE 100. The group is controlled mainly by Russian businessmen Alexander Nesis and Alexander Mamut, who floated around half the value of their company. Then a couple of weeks later, Russian steelmaker Evraz, part-owned by Roman Abramovich, also floated on the London stock exchange. This may be the beginning of a trend. Another Russian company large enough to join the FTSE 100 and seeking to float in London in 2012 is the Russian potash miner, Uralkali.
Russian buying power, of course, rarely comes without controversy. The injection of overseas money since the millennium, for example, has had a very mixed impact on the British property market, helping to hike prices outside of the hot spots – and out of the reach of ordinary buyers - during the boom years. The Russian share listings mean big money in the Square Mile, but have raised eyebrows on issues of transparency and corporate governance. None of this, of course, will stop the money from coming, nor the cheering by top end property agents and City financiers.
Stewart Lansley is the author of The Cost of Inequality: Three Decades of the Super-Rich and the Economy, Gibson Square, published this week.ShareThis