The last few weeks have been horrifying. Virtually nothing appears to have gone untouched by the nightmare playing out in Ukraine and beamed in real-time onto our televisions and smartphones. And the same is true of the London property market.

Chelsea might be a long way from Kharkiv but as a multi-pronged crackdown on Russian money in the city begins, many fear that the London market could be in for a shock. 

The logic is simple: the top end of the property market is probably Britain’s most visible contact point with Russia. So it follows that any sanctions applied to the people that drive high-value real estate (Russian oligarchs) could have a knock-on effect on the market as a whole.

But is this accurate? Is the market really that sensitive to Russian investment or are fears of a dip unfounded?

The current picture 

First of all, it’s important to state that sanctions will likely have some effect. The Telegraph estimates that Russian Oligarchs accounted for a 36.5% rise in central London property prices as recently as 2007

What’s more, there is evidence that purchases by Russian oligarchs have increased in the last few years. Data from the Land Registry reveals a massive increase in titles registered to Russian property owners, from 86 in 2010 to 1,127 in 2021.

All of this amounts to a pretty hefty chunk of capital being removed from the London property market as assets are frozen and seized. 

Indeed, there are early signs of a fall in activity. Investors’ Chronicle reported that high-end estate agents Savills and luxury developers Berkley Group shed six and five per cent respectively in late February. 

The long term 

We’ve established that sanctions have had some effect on the London property market, but what does this mean in the long run? And could it benefit buyers at the lower end of the market?

Let’s tackle average buyers first. It’s certainly true that Russian purchases of central London property have contributed to spiralling prices in the capital. Again, it’s a relatively simple equation. Billionaires buy up property in highly desirable postcodes, then the slightly less wealthy are pushed further afield, the middle classes are forced outwards until you end up with a situation where a studio flat in E10 costs north of £150,000 (for a much more elegant analysis of this process, we recommend this piece by author Rowan Moore). 

Therefore, it is possible that sanctions could lead to a slight decline in London property prices. However, this isn’t all that likely. Unfortunately, the real effect of the Ukraine crisis on ordinary buyers will probably come from its impact on inflation and interest rates. The Bank of England is going to have to do something to combat skyrocketing energy prices and that will almost certainly come in the form of meaner fiscal policy.

Let’s move on to the future of high-value property in London. For all that Russian money has catalysed rising house prices in London, this actually represents a sizeable minority of the luxury market. It’s no secret that the world is not exactly short on billionaires. And Russian buyers’ contribution pales in comparison to that of Hong Kong, China, the Gulf states and, more recently, southern Asia. 

Regardless of fast-tracked legislation to tackle ‘dirty money’ entering the UK, it’s unlikely that the globe’s super-rich will cease to see London as one of the premier destinations for property investment. Nature, or rather the market, abhors a vacuum and, while sanctions against Russia may cause a short term dip in prices, don’t be surprised when investors of other nationalities step into their place and push the needle right back up again.