Moneyfacts: Russian rate/London property
Thu 01 Jan 2015
The shock financial storey of the last few days has been the staggering rise in the Bank of Russia's base rate. It has been steadily increasing all year; as recently as March this year it stood at 5.5%, by July it stood at 8% and October saw another rise to 9.5%, but during December it has risen twice (so far), first to 10.5% and then just a few days later to 17%. Of course, Britain has experience of the BoE base rate at 17% but that was back in November 1979, and it didnt return to single digits until October 1982.
It is will documented that many Russian elite veiw Britain as a safe investment haven that has, over recent times, fuelled a sharp increase in Russian ownership of multi-million pound London properties.
Central London property markets have witnessed a 9% increase in the last 12 months, which many commentators have put down to foreign (Russian) investment. Does this mean that far from having no effect on the British economy, we will see a counterbalance in London house prices next year?
Could it be that a sudden increase in the number of London properties hitting the market at reduced prices cause a falling price ripple-effect, inadvertently doing more to kick-start the housing market than the ill-fated FLS?
Or could we see the, often discussed imbalance between the London property market and the rest of the UK reversed as regional property prices hold steady against a falling London market?
It's early days, but there is always a consequence for any action and usually it is not where we are expecting it to be.
By Sylvia Waycot
Source: Marsh & Parsons