They’re not much of a presence in the Greenwich market, but an interesting development

Only the rich can afford a sleigh: "Fleeing the wolves"

Only the rich can afford a sleigh: “Fleeing the wolves”

Russians disappearing from the London market as ruble collapses.

Wealthy Russian homebuyers are vanishing from London after driving a wave of foreign investment that lifted property prices to records. Only the oligarchs persist.

The number of Russians registered through Christie’s International Real Estate to buy homes in the city dropped by 70 percent in a year, said Giles Hannah, the broker’s senior vice president. That has led to a plunge in offers for properties priced at less than 10 million pounds ($16 million) as it becomes more difficult for all but the wealthiest to take money out of their home country.

“The banks are limiting what they can withdraw and we’re expecting further impact as sanctions kick in,” said Hannah, who advised Russian families on 180 million pounds of London property deals in the past two years. “The oligarchs are still spending. They already have banks or lawyers over here that allow them to make purchases.”

The number of Russians registered through Christie’s International Real Estate to buy homes in the city dropped by 70 percent in a year, said Giles Hannah, the broker’s senior vice president. That has led to a plunge in offers for properties priced at less than 10 million pounds ($16 million) as it becomes more difficult for all but the wealthiest to take money out of their home country.

Russian buyers have been “eliminated virtually overnight,” Andrew Langton, chairman of luxury-property broker Aylesford International Estate Agents, said by phone.

Russians were the biggest buyers of London’s luxury homes between January and July 2013, according to Knight Frank LLP. They dropped to third during the first six months of this year, behind Italians and French purchasers, the broker said.

The story is different for the oligarchs, a group of the richest Russians who have thrived since the fall of Communism. Russians accounted for 21 percent of home purchases worth more than 10 million pounds during the six months to October, up from 13 percent in the prior six months, Knight Frank LLP said in a report Nov. 25. Those that continue to shop for homes are targeting London, Paris and the French Riviera, according to Hannah at Christie’s.

“The heyday of the Russian buyer was probably two years ago and it’s been declining ever since, although there was a bit of buying as a result of the Ukraine crisis,” said Robert Bartlett, chief executive officer of broker Chestertons. “There’s now a broader influx of Indian and Middle Eastern money that is having a bigger impact on the London market.”

Not for nothin’, but this year saw a resurgence of huge sales in Greenwich, and a slowdown in the mid-range; $2.5-$4.5, or that’s my impression – statistics will follow in January. I wouldn’t equate our financial tycoons with the corrupt Russian oligarchs, but if Wall Street should crash, we’d probably be in for the same bad spell London’s enjoying.

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24 responses to “They’re not much of a presence in the Greenwich market, but an interesting development

  1. SBH

    Miami will be feeling this too.

  2. Flash

    Remember the Japs……

    JAPANESE SCRAP $2 BILLION STAKE IN ROCKEFELLER
    By STEPHANIE STROM
    Published: September 12, 1995

    The Mitsubishi Estate Company of Japan plans to walk away from its almost $2 billion investment in Rockefeller Center, the Hope diamond of world real estate.

  3. Anonymous

    I don’t get it–Maybe I’m dumb, but wouldn’t the collapse of the Ruble only have further encouraged capital flight? Obviously, if you waited until now you’re screwed, but if you saw this coming you’d be an idiot not to cash in and buy a relatively stable asset in another country. Right?

    • Cos Cobber

      My guess, there is tremendous political pressure on many Russian billionaires holding rubles to remain in rubles. Plus, their underlying businesses are under siege, denying them the lofty incomes used to purchase overseas homes.

    • Publius

      The billionaire oligarchs have been moving money out of the country for years. London has been a very popular spot for purchasing very high end homes for a number of years. The Chelsea soccer club was another purchase (Abramowich) +/- $400mm. Brooklyn Nets are owned by Prokhorov who also owns about 50% of the Barclay’s Center… also large yachts. Money stashed in Switzerland as well. Living and owning real estate in the tax haven of Monaco… “A very sunny place with lots of shady people” is the kingdom’s unofficial motto.

      The mere bourgeois rentiers have been the ones that have been caught in the recent downdraft.

      • Flash

        I don’t see the difference between oligarchs, who do not contribute to enriching society, and rentiers, who are profit eaters.
        Can’t they both benefit from foreign investment?
        Wiki Quoting:
        Rentier capitalism is a term currently used to describe economic practices of parasitic monopolization of access to any (physical, financial, intellectual, etc.) kind of property, and gaining significant amounts of profit without contribution to society. The origins of the term are unclear; it is often said to be used in Marxism, yet the very combination of words rentier and capitalism was never used by Karl Marx himself.

        • Publius

          Rentiers comes from France, where the politically connected lobbied the King to grant favors upon them that allowed them to acquire assets at favorable prices and literally collect income or rent whatever the case was. They did not add anything of value per se to society they merely lobbied to enhance their wealth at the expense of the peasants. The current use is referred to as rent seeking or rent seeking behavior (“crony capitalism”) whereby businesses lobby the government to gain better economic standing at the expense of their competitors.

        • Maitre d'Oyer et Terminer

          Publius is correct. In France, trusts are prohibited as violations of the anti-rentier laws in Code Civil. Marx was a piker compared to Napoleon.

      • anonymous

        The Russians in Monaco love their yachts, and by yachts, I mean boats that dwarf what was considered large by Onassis standards. Abramovich and Melnichenko, two bajillionaires, own mega yachts, the one owned by Melnichenko is called the most loved and loathed ship on the sea. 340 feet, called simply A, for the initial of his first name.

        Abramovich wasn’t about to be outdone. His yacht, aptly named Eclipse, did exactly that to Melnicheno’s puny yacht, coming in at 540 feet.

        The Russians are in Monaco also for all the Formula One teams they own. Why would anyone come to Greenwich when there’s Monaco?

        • AJ

          You’ve got that right, anonymous. Why would anyone want to live in the traffic congested, overpriced, shithole know as Greenwich unless they had to work in NYC?

    • GreenITCH

      you move money off shore prior to an economies collapse or to diversify . This is a liquidity squeeze… first it was sanctions squeezing Russians , you have an energy export economy ( near 70%) that just saw Oil move to half the price from its peak and at a 5/6 year low ..and now your CCY has just cratered moving from around 30 Rub per Usd to as high as 75 ….Russians are scrambling for USD , perhaps XAU and CHF …more liquid than real estate

  4. I got plenty o’ nothin’ and nothin’s plenty for me…

  5. Anonymous

    Wheee! 1998 couldn’t happen again over yonder, could it?

  6. So I am trying to figure out why this is the oligarchs and rentiers fault? Some said this has been happening for years, so someone should have seen this coming.

    • Publius

      DF,

      Capital flight has been happening for years because the gains were ill gotten. Moving the money out of Russia was a hedge against what we see today and also the whims of those in charge. These 2 classes only exist because the government allows them to. Think Putin, Khodorkovsky and Yukos Oil. The price of oil has been consistently above $100 bbl the past few years and this has allowed Russia to stockpile reserves,pay- off the proletariat and make mischief abroad. Crude oil prices have collapsed about 50% from June of this year due to increased oil production here as well as other sources getting back on line (Nigeria for example) combined with a decline in demand given the weak economic situation outside the US. Oil has gotten expensive for non USD countries that are net importers because the USD has gotten stronger versus these local currencies and crude oil trades globally in USD this has also dampened demand. The Russian Central Bank (RCB) was slow to raise domestic interest rates to support the ruble and has been heretofore unwilling to spend any of the estimated $400 billion in USD reserves that they have built up over the past few years when oil as mentions was over $100 bbl.

      A lot of people did get caught given the swift collapse of both crude oil prices and the ruble. Some got rubles out, but remember a lot of their operating businesses are located in Russia and you can’t simply move an oil company to lets say…….. Switzerland or Monaco.

  7. FYI: Just because I thought it was timely, I reposted the five threads from my sisters trip to Cuba back in 2012. Some interesting thoughts and comments from then.

    • Libertarian Advocate

      What????? You’re back blogging and you didn’t tell ME??????

      I’m crushed!

      • I didn’t even tell myself until five minutes ago. I was so done blogging that I gave up my Twitter account @EOSredux. Went to look to see if it was available today and lo and behold, some Russian has it. Yikes.

        Not really thinking of jumping back in the blog biz completely but the Cuba posts seemed worthy.

        • Babylon Sister

          Thanks for re-posting 🙂 I have friends born there, who still have family in Cuba and would love to see your sister’s photos. I hope to visit someday.

        • Sound Beacher

          Jump back in….
          Yeah!!, EOSR is back. How is the 2015 calendar shapping up??

        • Babylon, Looks like your opportunity to visit Cuba without having to go with a group may come sooner than later.

          Sound Beacher, Ha ha, the calendar. I think I’d do it again, but 2016 at the earliest. Hope you are well.

    • Your blog is now back on my “favorites bar!”

      • Cobra, I’m flattered. I spent a lot of this morning getting the blog updated and adding a new Twitter account. Right now, I’m listening to a crew of men spray foam insulation in the newly renovated spaces. I tried to go take a video but got shooed away because I don’t have a mask on. Cough cough. Asbestos?? 🙂