oligarch money laundering

The Luxury Housing Bubble Pops – Overseas Investors Struggle to Sell Overpriced Mansions

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It appears the music may have finally stopped for one of the world’s largest luxury real estate bubbles: London.

It’s well known that foreign oligarchs love London real estate as a means to launder funds, typically “earned” by soaking their host countries dry via corruption and fraud. This has caused absurd and irrational spikes in high-end residential real estate in the English capital, as well as a flood of new construction.

With emerging markets now completely collapsing, the seemingly endless flood of foreign money is drying up, and with it, London real estate.

So has the London real estate bubble popped? Probably.

– From the September 9, 2015 article: Luxury London Home Sales Plunge 26% – Has this Mega Real Estate Bubble Finally Burst?

The first real signs that the global luxury home price bubble had popped emerged last fall in the world’s capital of oligarch money laundering: London.

Since then, we have seen weakness in high end Manhattan real estate, but the trend has now spread and is starting to make itself apparent all over the place.

Yesterday’s Bloomberg article titled,The Surge in U.S. Mansion Prices Is Now Over, is really interesting. Here are a few choice excerpts:

The six-bedroom mansion in the shadow of Southern California’s Sierra Madre Mountains has lime trees and a swimming pool, tennis courts and a sauna — the kind of place that would have sold quickly just a year ago, according to real estate agent Kanney Zhang.

Not now.

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The Foreign Criminals Using Los Angeles Real Estate to Launder Money and the Developers Who Help Them

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Here, as in other roosting places of the superrich, the recent influx of foreign money has gone hand in hand with the rising use of shell companies — generally limited liability companies. Shell companies were used in three-quarters of purchases of over $5 million in Los Angeles over the last three years, a higher rate even than the roughly 55 percent in New York, according to a New York Times analysis of data from PropertyShark. What is more, in Los Angeles, where so many of the new palaces are spec houses — luxury magnets for global wealth — not only are the buyers shielded by shell companies, but the developers are, too.

– From the New York Times article: A Mansion, a Shell Company and Resentment in Bel Air

While New York City and London are already well known as top destinations for shady, foreign-money laundering oligarchs who often attain untold riches by thieving from their own people, the Los Angeles area has likewise morphed into a criminal real estate hub.

Monday’s article in the New York Times, titled, A Mansion, a Shell Company and Resentment in Bel Air, sums up so much of what is wrong about the U.S. economy and society as we reflect on how far we’ve fallen in 2015. A culture in which not only are the rich and powerful above the law, but where foreign criminals also can do whatever the heck they want and get away with it as long as they have billions to throw around. The fact that no one seems to be doing anything about any of it tells you all you need to know.

What follows are a few excerpts, but you should really read the entire article. From the New York Times:

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