Strolling through Holland Park, my west London neighbourhood, it’s pretty unusual to run into any neighbours. There are people, of course—this is London, one of the most heavily populated cities in the world—but the ones I usually see are not the people who own, or even rent, the houses around my small flat. Rather, they are the staff of the people who own the houses: servants washing cars, servants walking dogs, servants operating leaf blowers that would surely cause noise complaints, were there any neighbours around to make them. There are Polish builders and Spanish gardeners and Filipina housekeepers in white aprons and floppy cotton caps right out of Downton Abbey. The grand bay windows they are forever polishing tend to be shuttered from the inside out. That’s because many (if not most) of the neighbours who live in my neighbourhood don’t actually live here at all. They are what’s called, in London parlance, “non-doms”—non-domiciled residents—and they are buying up the city, one mansion-block full of $15-million flats at a time.
Peter Young at the high-end John D. Wood & Co. estate agency, said that 60 to 70 per cent of buyers in the city’s tony locations of Kensington and Chelsea were from overseas.
For investment and tax reasons, the U.K.’s non-doms funnel their cash into the so-called “land bank” of London real estate, and spend the rest of the year floating between houses and yachts in places like Palm Beach, San Tropez, St. Barts, Monaco and Moscow—the social axis of the global super-rich.
Foreign money is nothing new to London—for decades now, the capital has depended on an influx of Middle Eastern oil cash and spendthrift American and European bankers to keep sales of crocodile clutches humming at Harrods—but in recent years, things have taken a turn for the surreal.
While prices of luxury properties in the rest of the U.K. have dipped in the last year, in upmarket London neighbourhoods like Mayfair, Kensington and Belgravia, property is booming. In August, Savills, one of London’s poshest estate agencies, reported that the average sale price for its homes rose 18 per cent in 2013 to $5.1 million and, as of the first six months of this year, the company’s pre-tax profits were up 25 per cent. It’s not simply a bubble, but a state of affairs that recently prompted high-end real estate expert Henry Pryor to declare that the London market had “completely lost touch with reality.” And make no mistake: The non-doms are driving the madness. As Debra Stroud, sales director at Chesterton Humberts in Knightsbridge, recently told the Guardian’s real estate section, her clients are mostly “international buyers looking for good two- to three-beds. The majority of them will use it just a few months a year, and they want to be able to step out into the shops and restaurants.”
In other words, for the global super-rich, buying a several-million-pound residence in London is a cheaper, homier alternative to a suite at the Dorchester—and a better investment, too.
A British finance worker employed by a private Swiss bank recently told me at a London dinner party that he spends “at least half” his working life “buying up London real estate for Russian clients, simply as a place to park their money.” Clients, he added, who don’t pay taxes in the U.K. In Britain, those who live in the country for fewer than 183 days are not liable for U.K. tax on their worldwide capital gains. And, unlike many countries, Britain does not have legal restrictions on overseas investors owning property. Moreover, properties are taxed largely according to the number of adult residents, rather than by market-value assessment—so a $100-million Belgravia manse might only pay a tad more in municipal taxes than a tiny bachelor in a walk-up building.
So what does this mean for the people who actually live in this city? Well, for people with families and jobs and net worths well under seven figures (people, in other words, like this columnist), it’s not good news.
Local services like state schools and libraries are essentially ignored by non-dom residents, who have no real stake in their community, given that they don’t actually live there. And independent businesses are suffering across London from the lack of local patronage. “Three years ago, I had people ordering cases,” says Jean Luc Menard, a wine-shop owner in west London who was glumly presiding over a going-out-of-business sale last week. “Now, I guess rich people import their own wine from abroad. Or they bring it in with them. In any case, they don’t buy it here.”
Increasingly, in London neighbourhoods like mine, the people who do actually live here feel resentful—and baffled—by the lives of our invisible super-rich neighbours. Last week, the tabloids reported on a drinking game that had broken out after midnight at the Russian-themed nightclub, Kitsch. According to the story, two young Russian millionaires (and their scantily clad female entourages) had competed to see how many champagne cocktails they could drink over the course of three hours. Glancing at the headline, the shopkeeper in my local newsagent just shook his head. “Over £130,000 bar bill,” he said ruefully. “They could have bought a studio flat for that.”