Only the stars are higher
Official statistics show that London has already acquired the status of the city with the most expensive luxury housing. If the cost of 1 sq. ft. in London Chelsea is on average 1200 pounds, then in Manhattan it is only 1000 pounds. Moreover, in the super elite areas of London, the price of 1 sq. ft. is 3,000 pounds per 1 sq. m, slightly higher than in New York (2,700 pounds) and Monte Carlo (2,800). And cities such as Tokyo, Hong Kong and Singapore, known for their fabulous high prices, lose even more against the background of London.
The elite segment of the London real estate market is developing according to its own laws, and the excitement is constantly fueled by the increasing interest of foreign buyers – primarily Russians and citizens of rich Asian countries. Suffice it to note that transactions with objects worth more than 2 million pounds are registered on average twice a day.
The Russians are coming
Experts attribute the rise in prices for English luxury real estate, observed over the past year, precisely to the demand from Russian clients. Real estate agencies specializing in luxury apartments and mansions are required to hire Russian-speaking agents and intermediaries.
The first "Russian wave" of oligarchs and industrial magnates was followed by the "second wave" – professionals, officials and financiers. One of its main driving forces is the political uncertainty of Russia in the next, 2008. Agents call Russians ideal buyers because they choose houses in the most expensive areas, do not bargain because of the price and often buy a house with furniture.
If in 2000 Russians spent 93 million pounds on the purchase of apartments and houses in London, then in 2004 this amount already amounted to 396 million, and in 2006 it grew to 799 million! In general, over the past six years, Russians have spent more than 2.2 billion pounds on real estate in London. The most expensive apartment bought by Russians in 2006 is a five–bedroom penthouse in the Knightsbridge area, whose cost exceeded 16 million pounds.
To date, Roman Abramovich has the largest English possessions. Over the past two years, he has spent almost 50 million pounds on four houses in the Belgravia area and four luxury apartments in Knightsbridge, next to the famous Harrods store, which is owned by the father of the deceased boyfriend of Princess Diana. Abramovich also owns the Fyning Hill estate in West Sussex County, worth 15 million pounds. Another well-known Russian oligarch, Oleg Deripaska, owns a house in Belgravia, which is estimated at 25 million pounds.
Geography is expanding
Wealthy Russians are beginning to show interest in buying property outside London as well. The London-based Knight Frank agency notes that while in 2005 Russian buyers purchased only 11 houses outside London, in 2006 this figure rose to 73 houses. Russians are mainly attracted to the town of Esher in Surrey, as well as the town of Ascot in Berkshire. When the 12 million-dollar Ascot house appeared on the market last June, half of the 22 buyers who came to see it were Russians. The same trend is observed with other areas outside London.
Recently, there has been interest in buying family properties in Scotland, which is due, among other things, to the opening of a regular direct flight Moscow–Edinburgh. As Jamie McNab, director of the Edinburgh branch of Savills agency, notes, Russians are interested in buying houses, estates and even fortresses. Last year, steel magnate Vladimir Lizin paid 6.8 million pounds for the Aberuchill estate, a 16th–century fortress with 3,300 acres of land.
In order to explore offers outside London or get to their country property, Russian buyers prefer to use helicopters. The president of one of the charter companies even recently complained about the lack of helicopters and pilots caused by increased demand from Russian customers.
Why London?
What attracts Russian buyers to England, and in particular London? Of course, a high degree of security and political stability. Luxury shopping and nightlife. Good opportunities for education, both higher and secondary.
A very important advantage of London is its exceptional openness to foreign capital and convenience for doing business. The cultural and democratic traditions of the British capital are traditionally attractive to the Russian mentality. But perhaps the most important thing is that London attracts with its atmosphere. Its dynamism and aura of luxury perfectly meets the spirit, ambitions and aspirations of the young Russian capital.
As for the real estate market itself, Russians are attracted by relatively small taxes when buying real estate. The so-called stamp duty, a scourge for the average Englishman, is 3% when buying a house up to 250,000 pounds and 4% when purchasing more expensive real estate. The rate does not change when buying a house of several million – and, thus, taxes can be considered quite acceptable if we take into account that in some European countries the progressive tax on the purchase of expensive real estate reaches 7%.
A few spoonfuls of tar
There are also very unpleasant moments when dealing with London real estate. First of all, this is gazumping – the seller's refusal from the transaction due to the receipt of a more favorable offer. This term came into use in the late 1980s and early 1990s, when real estate prices went up. The fact is that under English law, neither the seller nor the buyer are obliged to fulfill the agreement until the final contract is signed – even if the seller has taken a deposit. Since the formalities related to the execution of the transaction and the work of lawyers usually take several weeks, it is not uncommon for the seller to refuse the transaction, tempted by a more profitable offer received later. Most often, the agency continues to inform the seller about incoming offers even after he has already agreed to the sale. Does it not fully correspond to the usual ideas about ethics? Well, it was not for nothing that the Englishman Charles Darwin created his famous theory of natural selection!
If the seller refuses the deal, the buyer loses not only the future house, but also the money that he has already paid to lawyers, building inspectors, etc. The British joke – if you have found a good house and are going to buy, do not tell anyone about it. In general, they try to hide the house as a good groom... Of course, the situation with expensive houses is somewhat different – they are looking for and waiting for a buyer there, but nevertheless this feature of the English real estate market must be borne in mind. By the way, in Scotland, the laws practically exclude the possibility of gazumping.
There are other subtle points. If you stay in the country for more than 90 days a year, a foreigner becomes a UK tax resident. British officials have recently cheated – retroactively decided to include the day of arrival and the day of departure in the allowed period of stay. If earlier, arriving in London on Monday and departing on Wednesday, a person received one day in the "tax offset", now all three are considered. Some wealthy Russians have already fallen for this – imagine the amazement of one of them, who meticulously calculated his "term" to the exact day when a tax inspector came to him demanding to pay millions of pounds in tax!
Ascetic luxury
It should be borne in mind that after the mind-blowing luxury to which the inhabitants of Ostozhenka and Rublevka are accustomed, even the most prestigious London apartments make a more modest impression. The layout is more like a typical one, the ceilings are not too high, the decoration, by Moscow standards, is modest. As a rule, it is impossible to agree on an individual layout at the construction stage, but this does not really bother Russian buyers. Apartments and houses are instantly rebuilt, and the old decoration is changed to a new one – using the rarest and most expensive materials.
The British capital is increasingly referred to as Londongrad or "New Moscow". And if the British themselves are horrified by the ultra-high cost of real estate, then the Russians calmly perceive million-dollar prices and feel more confident as trendsetters in the prestigious housing market. Russian expansion continues.
