Illicit funds entering the market have increased average property prices by nearly £3,000 nationwide, with the impact in London exceeding £11,000, according to a research

Money laundering through the UK’s property sector is contributing to higher house prices and making it more difficult for typical families to buy homes, shows new research from SmartSearch.

The anti-money laundering and digital compliance solutions provider estimates that illicit funds entering the market have increased average property prices by nearly £3,000 nationwide, with the impact in London exceeding £11,000.

Since 2016, suspicious wealth totalling over £11 billion has been channelled into UK real estate, with more than half of these transactions involving shell companies registered in British Overseas Territories. Across England and Wales, more than 87,000 properties are now owned by anonymous entities based in tax havens, with a combined estimated value of more than £100 billion. London is particularly affected, accounting for 40% of these anonymously owned homes.

The UK property market is one of the most vulnerable sectors to financial crime, because of the high values involved and the ability for companies to buy, own, and sell property with minimal scrutiny, according to Phil Cotter, chief executive officer at SmartSearch.

This allows criminals to exploit loopholes—like purchasing through anonymous shell companies—to clean their money. These buyers often pay inflated prices to secure quick deals, which in turn distorts the entire market, he said.

In some prime areas of London, dirty money has inflated prices by up to 20%, pushing FTBs and local families out. In boroughs such as Westminster and Kensington & Chelsea, offshore buyers have created so-called ‘lights-out streets’, where luxury homes sit empty while local communities suffer, he added.

Estate agents are expected to play a key role in preventing money laundering in property transactions. However, SmartSearch’s analysis suggests that many agents are not meeting their legal obligations.

Recent enforcement action saw nearly 200 estate agents fined over £1 million for breaches of anti-money laundering (AML) regulations, mainly for operating without proper registration.

Data from the HMRC Supervised Business Register indicates that, out of around 25,000 VAT and/or PAYE-based estate agents in the UK, only 21,578 currently have AML supervision. A further 1,341 have applied but are awaiting approval, and 980 have allowed their supervision to lapse. This leaves around 3,400 agents—around 14%—operating without the required oversight.