London’s property market is facing increasing scrutiny as new reports reveal that shell companies—often registered in offshore tax havens—are owning a significant portion of residential properties in the city. This ownership structure is inflating property prices, making homes less affordable for local buyers, and complicating efforts to enhance transparency and tackle money laundering in the real estate sector.
Significant Influence of Shell Companies on London Property Prices
Analysis from a leading anti-money laundering and digital compliance firm, SmartSearch, alongside research from international non-governmental organizations, shows that properties owned by anonymous firms based in offshore jurisdictions have pushed London property prices up by an estimated average of £11,000. Some prime areas of London have seen price inflations of up to 20%, driven by investments from offshore entities seeking to conceal the true ownership of properties and launder illicit funds.
It is estimated that around 40% of the more than 87,000 properties owned by anonymous offshore firms in England and Wales are located in London, collectively valued at over £40 billion. Since 2016 alone, suspicious wealth exceeding £11 billion has flowed into UK real estate, with more than half of those transactions involving shell companies registered in British Overseas Territories, such as the British Virgin Islands and the Cayman Islands.
“Lights-Out Streets” and Community Impact
In affluent boroughs like Westminster and Kensington & Chelsea, offshore buyers have created so-called “lights-out streets”—streets where luxury homes remain unoccupied for long periods, leaving local communities hollowed out and pushing first-time buyers and families out of the market. This phenomenon has drawn the attention of officials and community advocates who argue that the prevalence of empty, high-value properties exacerbates the city’s housing crisis and social inequality.
Phil Cotter, CEO of SmartSearch, noted, “The UK property market is one of the most vulnerable sectors to financial crime. Criminals exploit loopholes such as purchasing through anonymous shell companies to clean money, often paying inflated prices to secure quick deals, distorting the overall market”.
Challenges in Ownership Transparency and Regulatory Oversight
Despite government efforts to increase transparency, such as the introduction of the Register of Overseas Entities (ROE) under the Economic Crime (Transparency and Enforcement) Act 2022, a significant number of properties remain under opaque ownership. Recent studies show that over 70% of UK properties owned via overseas shell companies do not disclose the beneficial owners’ identities publicly. In many cases, even law enforcement agencies cannot ascertain who truly owns these properties.
The ROE was designed to tackle money laundering through property by requiring overseas entities holding UK land to register their beneficial owners. However, reports highlight major design flaws and loopholes that continue to allow anonymous ownership and hinder enforcement.
Estate Agents Under Scrutiny
Estate agents are legally required to enforce anti-money laundering (AML) regulations as part of property transactions. However, recent analyses indicate that a significant portion of estate agencies are not fully compliant. Nearly 200 agents have been fined over £1 million in total for breaches such as operating without AML registration. Data shows that about 14% of VAT or PAYE-registered estate agents operate without AML oversight, and over half of those who are registered sometimes fail to fully verify the controlling individuals behind business clients.
This lack of rigorous enforcement allows buyers using shell companies to clear deals rapidly and at inflated prices, further distorting property values and making homeownership more difficult for ordinary Londoners.
Broader Concerns Over Illicit Investment in UK Real Estate
The UK’s real estate sector has long been attractive to illicit investment due to high property values and lax scrutiny on ownership structures. The nickname “Londongrad” has emerged to describe London’s reputation as a hub for foreign money, including suspicious capital linked to corruption, oligarchs, and politically exposed persons.
Investigations such as those by the Pandora Papers revealed billions of pounds in secret UK real estate transactions connected to influential figures worldwide. Offshore companies are used not only to mask ownership but also to capitalize on tax advantages and avoid regulatory oversight.
Steps Forward and Policy Discussions
The government continues to debate strengthening economic crime legislation to close loopholes around shell company ownership and enhance beneficial ownership transparency. Additionally, efforts focus on improving estate agents’ compliance with AML regulations and boosting law enforcement’s ability to trace illicit wealth in the property market.
Experts emphasize the importance of addressing these challenges to protect housing affordability and community integrity in London while maintaining the UK’s global reputation for financial transparency and rule of law.
AML Editor’s article was originally published in propertywire on 27 August 2025,