Undeclared Russian capital is increasingly flowing into the U.K. real estate market as sanctions weigh on the Russian economy, Deutsche Bank strategist Robin Winkler said yesterday. Speaking in an exclusive interview, Winkler said that in recent months, nearly 1 billion pounds per month of unmonitored funds are invested in the U.K. "A lot of that money goes into the housing market, especially the London housing market. These transactions are not recorded by the tax authorities, they are bringing cash in suitcases," Winkler said. "Unfortunately, the money bypasses the banks. It goes through offshore financial services; mailbox companies, etc. Not all the funds are derived from criminal activities. It's just difficult to trace back," Winkler said.
Russians show great interest in the luxury real estate market, Winkler said. Economic sanctions on their country have forced Russians to take their capital out of the country, with little concern for U.K. regulators. "Some of it is black money, some of it just unrecorded for purely technical reasons. Regulators are aware that it is difficult to gather the data on a regular basis." Winkler noted.
Last year, tumbling oil prices, one of most central pillars of the Russian economy, and challenging sanctions imposed by the West over the Ukraine conflict, hit the country's economy and the ruble declined by 50 percent against the dollar. "The ruble was devalued quite a lot, probably there is a high demand to hold some assets that could be quickly converted to other currencies," Winkler said. Experts believe that Russian capital share in the flow of undeclared funds to U.K. markets is around 40 percent. Transparency International UK has said that 36,000 London properties are owned by hidden companies registered in offshore havens, and that London authorities are responsible, as they do not impose the needed regulation.