By Laurenz Frank
The city of London has become more and more the epicenter for an offshore financial zone currently hosting 227,000 millionaires. As the wealthiest city in Europe, London has attracted attention from foreign investors seeking to benefit from the lucrative tax-breaks triggered from the Brexit initiative. The prestigious institution Sciences Po, that has educated French presidents, diplomats, and executives affirms that “almost $240 billion worth of UK properties were held from abroad in 2018,” underlining that the majority was controlled by institutions.
The Harrods London - an iconic symbol of the luxury shopping scene (Image by AD Magazine)
Purchased by the Qatar Investment Authority (QIA) in 2010 from Mohammed Al-Fayed, Harrods was seen as the first major impact of foreign investments. The £1.5 billion acquisition signposted the large-scale involvement of the QIA, later on obtaining the supermarket chain Sainsbury, the London Stock Exchange, and Heathrow Airport. With a 75% or more ownership of shares and voting rights the Qatari Governmental Authority leverages their non-domestic tax status, diminishing the tax burden on profits made from Harrods. In addition, single billionaires dominate the property market in London, leveraging its profitable tax constitution. With a £250m property portfolio Roman Abramovich purchased 70 homes, buildings and pieces of land. The overall acquisition of 53 luxury homes is across prime neighborhoods in central London, namely Belgravia, Chelsea Village, and Kensington Palace Gardens. Underlined by Savills London, the strategic investment of such properties is seen as capital appreciation, due to the low risk and high reward, coupled with currency arbitrage as investors with lower foreign currencies can benefit from the exchange rate by purchasing property in London. “Kensington and Chelsea accounted for 64% of all £5 million-plus house sales in the first half of 2024,” spotlighting that billionaires benefit from the Stamp Duty Land Tax (SDLT) purchasing their property through offshore legal entities, reducing inheritance and capital gains tax.
Two of Ambramovich’s offshore companies, located in Cyprus one valued at $900m and the other at $304m since 2016, indicates how foreign investors in London employ opaque ownership structures.
All properties are located in high value growth regions where homes appreciate significantly since purchase. Wealthy investors from foreign countries profit from a countercyclical value stability in London by hedging against volatility in other industries. Even Though sovereign wealth funds and billionaires introduce economic benefits by revamping London’s global status, housing costs and inequality drive up urban exclusivity, establishing a significant gap between social classes.