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Comment by gumby | Hacker News Reader

It seems pretty clear that the massive gains in high end real estate in Manhattan and central London have been driven by offshore money, some (perhaps most?) of which is money laundering (buy something liquid for X -- even if you overpay and end up selling at a "loss", what you get out has been laundered). But this is all at the very high end -- you see in manhattan that houses people actually live in sell at half the $/f2 that unused "investment" properties do. So are they really driving up prices and pushing people out? I don't know.

In Palo Alto, Chinese money is flooding in and pushing up prices, but the houses are actually inhabited, so yes, it's driving up prices but it would be harder to complain that something nefarious is going on (and indeed I haven't seen any such complaints).

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I don't think it's money laundering as much as money stashing. A lot of this money is flowing in from areas where the banks are unreliable, personally owning real estate is not certain (there are a preponderance of eminent domain seizures) and your control of your in-country assets is subject to the government's opinion of you.

I don't think this is laundering as much as finding a mattress to hide it under that pays back a bit on your investment. So that if you lose everything you can liquidate your hidden little pockets of real estate and maybe make a bit of cash while fleeing to where ever.

Pretty much this. It's also the reason why I believe cryptocurrencies will continue to do well in the coming years -- there's a need for a state independent store of wealth.

The advantage of property being it will always be worth something.

> it will always be worth something

Assuming a sufficiently friendly state apparatus that enforces the ordinary claims of ownership. If that goes away, or is turned against you, it's not yours anymore. With stuff like real estate, you can't exactly smuggle it out of the country.

(This is what the Global Magnitsky Act and international equivalents are meant to do- having your personal assets frozen by the US or UK government suddenly makes your frozen assets somewhat less valuable to you...)

Sure, if it doesn't end up being confiscated.

It's much easier for a state to seize your cryptocurrency key than foreign real estate. There's a whole system of law protecting your NYC penthouse, but a couple of goons and a hammer can take all your BTC (without any way to reverse it!).

The penthouse, yes. But not the shares of your offshore shell corporation owning the property, which can easily be transferred through a simple share purchase agreement..

The whole point of doing this is that no one knows you own property in London. If you keep 130 million dollars worth of bitcoin in your wallet literally anyone can see it.

How do they know it's yours?

If you've 130 million dollars worth of bitcoin it isn't good practice to keep it all in one wallet. Satoshi's estimated 1 million bitcoins are distributed among many thousands of addresses for example.

Indeed. In some ways what the UK is exporting is rule-of-law, a functioning courts system and a government that for good or ill is extremely reluctant to interfere with real estate ownership, even if it's been bought with suspect money.

The existence of a safe offshore cash stash is a benefit to some autocrats and a risk to others - it allows their underlings to escape.

The complaint is against anonymous ownership, not foreign ownership.

I didn't notice any statement in the article opposing foreign ownership in general. Cameron states "We need to stop corrupt officials or organised criminals using anonymous shell companies."

Why does ownership need to be anonymous to perform the function you describe if not to conceal obvious money laundering? It is specualated in the article that the real owners are civil servants with billions in wealth that is inexplicable absent corruption.

To play devil’s advocate: if your faith in your government is such that you’d like to allocate your wealth in another country, you may also be motivated to hide that wealth for reasons that have nothing to do with corruption. There can be reasons for discretion and anonymity other than money laundering.

This is a good point, and easy to imagine a situation where a foreign citizen might fear retaliation from various bad actors were it know that they were exfiltrating assets to other countries. I think the question should be whether this is remotely as common as laundering. It seems implausible to me that a considerable number of people other than the elite and corrupt use anonymous foreign shell corporations to protect their safety and legitimately acquired property.

I think addressing this kind of corruption is an international cooperation problem and, in utilitarian terms, the people who are harmed by financial corruption stand to gain more by solving it than the people who profit from that kind of anonymity.

I’m certainly willing to be convinced by evidence that a considerable number of foreign citizens need to own shell corporations in my country simply to protect their liberty and property, but I find that pretty far fetched.

So let them stash it in a bank account or the stock market (both places where it will do more good for the economy). Houses and land are special and scarce, and shouldn’t be subject to the same rules as other financial assets.

> money laundering (buy something liquid for X -- even if you overpay and end up selling at a "loss", what you get out has been laundered).

You're missing a step in the money laundering here - you can't use completely unlaundered cash to anonymously buy investment property, you have to launder somehow first.

you’d be surprised. in the past at least there’s been far less oversight of real estate transactions than other types.

Usually this involves a set of corporate shells with opaque ownership; there may not even be a registered transfer of the property, just in shares of Mystery Holdings Corp #237 (British Virgin Islands).

But this has nothing to do with money laundering. If money gets into international banking system it's probably laundered already. Money laundering dosen't work like you think it is - "shady offshore companies" is not enough to launder money because every one of this jurisdictions will work with law enforcement in case of money laundering. Then just follow the money and you will get busted. Shell companies will just make whole process longer for law enforcement agencies.

Real estates in rich jurisdictions are used for stashing/anonymously investing money, not laundering money.

Or just find a shady real estate developer. Maybe one who has a famous name and had a reality TV show. A real greedy and corrupt type who doesn't ask a lot of questions or do much (or any) due diligence.

But this is all at the very high end -- you see in manhattan that houses people actually live in sell at half the $/f2 that unused "investment" properties do.

I suspect that the discrepancy in the $/sqft ranges is more about the property quality and scarcity at that range; you pay a premium for an 8,000 sq. foot duplex with a terrace that overlooks central park and has world-class finishes and amenities because there are far fewer of them than ultra-wealthy people who want them.

Here's an very clear article talking about this problem in general as well as specifically in Israel, where housing prices have more than doubled in the past decade: https://www.timesofisrael.com/do-israels-ghost-apartments-ex...

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