Discussion in 'Fine Living, Home, Design & Auto' started by meister, May 7, 2012.
Here is the article it was behind the NewsCorp firewall.
SOME time today, if all goes smoothly in the plush back offices of Londongrad, a minor oligarch from a former Eastern bloc country will receive the keys to a 10.5 million pound ($16.6m) family home in Kensington.
We will probably never know his name. His estate agent says he has bought the place through a shell company to remain anonymous, and ₤10.5 million is a fair price for anonymity.
What we do know is that this new Londoner will pay no capital gains tax if he sells the house, and minimal income tax while he lives there. We also know that this is the third "super-prime" property sold by his agent since January; that there are plenty of other agents like him; and that their ability to offload modest-looking terrace houses to the global plutocracy for eye-watering eight-figure sums is one of London's most outlandishly lucrative talents.
London has many lucrative talents, including a knack for promoting itself as the greatest city on Earth. It is officially "the best big city in the world", according to the Greater London Authority. Two months ago it came top in a Citigroup survey of "global appeal" based on its roll-call of think-tanks, MBA programs and corporate headquarters. Last week Tripadvisor called it the world's best city to visit, and two and a half centuries ago Samuel Johnson said something similar. But how great is it really? Why? For whom?
Over the next four months the greatness claim will be severely tested by the Olympics and the eccentric, Ruritanian preening of the Diamond Jubilee. For millions, the city's ability to put on a show will be the critical test, and Boris could definitely blow it. The royal barge could sink. Blur is headlining the final Olympic concert, and Blur could tank. Big time.
If there is even the perception of a cock-up, the schadenfreude in New York and Paris - the loser cities of the Olympic selection process in 2005 - will be shrill and nasty. (In The New York Times, it already is.) If the big show disappoints, the premium economy cabins in the jumbos lining up for Heathrow will empty out after the Games as discerning tourists look elsewhere for "buzz". But in first and business class it is reasonable to predict not much will change.
The seriously rich are not so fickle in their affection for London, and herein lies a paradox. It is the paradox of a giant, damp, unnavigable mess of a city, bombed out in the war and shoddily rebuilt since, which is nonetheless an extraordinarily powerful magnet for a thin stratum of international investors who, by definition, could be investing anywhere.
In London, 85 per cent of super-prime property buyers are foreign, compared with 50 per cent in New York. Most of those who spend ₤10 million or more are from the East or Middle East, but in the layers below that threshold there are high-net-worthers from every continent. As of 2010, these included a new influx of Greeks and Italians seeking shelter from the eurozone debt debacle. As of Sunday, the French invasion will have picked up steam in case President Hollande proves serious about a 75 per cent top tax rate. French inquiries to one wealth manager were up 40 per cent even before the election.
The French will head for South Kensington, but not just South Kensington.
"When we set up our business and we were trying to understand the number of rich people in London we got the statistics from the Inland Revenue and at first they weren't that impressive," says Alex Cheatle, the founder of the Ten Group of lifestyle concierge companies. "But then we walked that arc from Hampstead through St John's Wood to Notting Hill, Kensington and Chelsea, and through the oases of money south of the river, and we realised: in every single one of these houses lives a millionaire."
On the whole, London's rich foreigners don't come for the weather, the queues, the riots, the architecture or the chance of tickets to Mamma Mia or Olympic ping pong. They don't come for the show, but for the lack of it.
This absence of fuss can be expensive. One Russian worth several hundred million - let's call him Sasha - came to London in 2004 for the simple reason that he feared arrest at home. His reasons for staying were more complicated. With money no object, he found that he could provide his family with some of the best healthcare in the world at Harley Street clinics and the private hospitals in Fitzrovia and Wimbledon for which they act as feeders. He could educate his children at private West London day schools that understood his need for privacy. (The chain of Thomas's prep schools, with branches in Kensington, Fulham, Battersea and Clapham, is especially popular with Sasha's set. Fees start at about ₤5000 a term.) He could live in an immaculate penthouse on the north bank of the Thames, serviced by a neighbouring five-star hotel, from where it is a 20-minute chauffeured drive along the Embankment to his office in the City. But most valuable of all was the chance to build and protect his reputation. At this, London excelled.
Sasha is personally close to Roman Abramovich and has worked in similar business sectors. He has not been sued for his fortune, as Abramovich has by Boris Berezovsky. Nor has he been libelled, but should it come to that he has every reason to trust a British legal system that has made London the libel tourism capital of the world. The same system has rebuffed politically inspired attempts by Moscow to have him extradited. With the Access to Justice Act of 2006 it has gone out of its way to extend its protections (and divorce services) to rich foreigners, and in the heart of the City it has erected a ₤300 million building to make them feel welcome. The Department of Justice calls the Rolls Building "a centre of excellence for high-value dispute resolution" and "the largest specialist centre for the resolution of financial, business and property ligitation anywhere in the world".
Like most of his peers, Sasha has a longstanding relationship with a London-based boutique PR firm, which offers crisis management and "reputation management" services. One such firm, Bell Pottinger, was the subject of an undercover report by the Bureau of Investigative Journalism last year in which two senior partners were recorded boasting of their access to David Cameron's Cabinet and their expertise in the "dark arts" of Google search manipulation. They were pitching to reporters masquerading as representatives of the Uzbek Government, a serial human rights abuser, for an account that they estimated at ₤1 million a year.
Reputation management is a delicate business, especially when applied to individuals and governments. Some call it privatised diplomacy, others, reputation laundering. Either way, it is a business in which London has many players and few rivals.
"There are certain regimes and issues where anyone with any intellectual capacity can work out that you shouldn't touch them with a bargepole," says a former agency executive who worked closely with the Crown Prince of Bahrain but declined to represent Colonel Gaddafi. Despite the warning signs, he adds, in London "you'll always find someone". Sure enough, Gaddafi did.
Unlike their rivals in New York and Washington, London's reputation managers and lobbyists are helped enormously by the absence of a legal requirement to register their clients. Bell Pottinger, for example, would have to register them if it were a member of the Association of Professional Political Consultants. But it can, and does, choose not to be.
London seduces the rich in public with its promise of good schools and comfortable homes with gardens near the the world's top international financial centre. It seduces them in private with the promise of discretion, security and a service culture that the rest of us need never know exists. "It's the sheer number of factors coming together in London that just don't come together anywhere else in the world," muses Charles MacDowell, a property search specialist who last year found a ₤35 million house in Kensington for a client.
Some factors are subjective. Others are technical. Estate agents in New York charge commissions of up to 6 per cent, compared with roughly 2 per cent in London. Total transaction costs in London are about 30 per cent lower than in New York, even after payment of stamp duty, and there's no annual property tax. Nor is there the grilling to which the custodians of New York's most fashionable apartment buildings subject prospective buyers.
Non-domicile tax status, carefully preserved by George Osborne, allows rich foreigners in London to harvest non-UK assets virtually tax-free on payment of an annual ₤50,000 levy. Capital gains rules that are generous by international standards allow them to profit handsomely from the very property bubbles they create by buying here. Round-the-clock concierge services such as those invented by Mr Cheatle cater to their every whim, wherever they are. (The Ten Group once sourced and air couriered a Barney the Dinosaur suit and two ₤35,000 Hermes Birkin bags to Baku at a day's notice.) And when the temptations of insider trading prove irresistible, it is better to succumb in London than America. Since 2009 the Financial Services Authority has secured only a handful of convictions. In New York, the authorities have won guilty pleas or verdicts in 57 of 66 cases brought.
London is not especially beautiful, or kind, or gentle. It is creative, but not as competitive as New York or Singapore. It is a tough place to be poor, but as it prepares to welcome the world, this much is clear: it is a great place to be rich.
I don't think that is news for anyone living in Europe, London is pretty much all Arab money nowadays Harrods etc.
My sentiments exactly.
There are a lot of people buying up London real estate who will rarely visit their property. They're just parking their cash in a safe haven.
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