Chris Blackhurst: The Government must intervene to unmask foreign buyers inflating a new property bubble with questionable cash

Midweek View: They’re buying because our regulation is ‘light touch’ - code in international circles for non-existent

Almost two thirds of properties owned by foreign companies are linked to the British Virgin Islands, pictured, or the Channel Islands

No sooner did the block of flats go up where I live than they were pretty much all gone. A board appeared, saying “85 per cent sold”.

The same is true of another development nearby. A glance on rightmove.co.uk shows that apartments in these schemes simply are not available to buy.

Every one of them, I would hazard, has been snapped up by a foreign buyer. I’d go further and predict that the majority of my new neighbours are offshore companies registered in the names (if you could ever track them down) of Asian investors, predominantly Chinese. The local word has it that the developers held sales fairs in Hong Kong long before the blocks were completed, and came back delighted with the response.

There may be a shortage of those flats to buy but there are plenty to choose from to rent. The son of a friend of mine had a dispute with his landlord recently. When he finally got an address to contact from the Land Registry, it was in the British Virgin Islands.

According to an investigation by the Financial Times, more than £122bn worth of property in England and Wales is held by companies registered in offshore tax havens. Nearly two-thirds of the 91,248 foreign-company-owned properties in England and Wales are linked to the British Virgin Islands and Channel Islands. Most of that property is in London, much of it according to value (27 per cent) in Westminster.

These are shocking figures and they make a mockery of our supposed money-laundering laws, the extent we have got to go to in order to hire a solicitor or visit a casino. In the case of the former, you can’t just ask a solicitor to advise you – first you have to produce a passport or driving licence and a utility bill showing your address that must be not more than three months ago. The same is true of a casino, expect there they take your picture as well – even if all you want to do is use the bar and have a sandwich. I know, because I’ve experienced both recently.

It’s not only lawyers and gambling dens – our money-laundering laws are such that anyone wanting to do anything in financial services must show identification.

But when it comes to buying property, involving substantial sums of money, it’s a free-for-all. Estate agents and solicitors are required to carry out due diligence when making a sale. But that only goes as far as the company buying the property – they often stop short of identifying the ultimate owner.

The truth is that Britain, and the South-east of England in particular, is a world centre for dirty money. Central to that illicit flow is property. Crooks and corrupt potentates like property, especially UK property. It’s safe – prices always go up over time; it can swallow large dollops of cash; there are no restrictions on just how much can be owned; and it can provide rental income.

For two years now, a house not far from me has been on the market for a little under £10m. The already-enormous house on the plot was knocked down and replaced with something even bigger – what the agent describes as a “spectacular” mansion, but I would say is a hideous monstrosity out of scale with its surroundings.

Each to his own of course, but what is clear is that the owner is under no pressure to sell. Two years without a taker and no price reduction. All that is known about them is that they’re of overseas origin, possibly Arab.

Now, either they really are incredibly rich and can afford to play a long game, or the money was not theirs to begin with, or both. In any event, their strange behaviour is affecting the rest of us. They’ve set the bar for the local market, and that’s the pattern right across the London and the South-east where zillionaire foreign buyers are driving prices skywards.

The complacency, or rather blind eye, as to what is occurring is astonishing. “When you have a company hidden offshore, it is, I think, almost impossible for your average estate agent to find out what on earth is going on,” Peter Bolton King, global residential director at Rics, was quoted as saying. “You have to make a professional judgement whether you are satisfied with the information that you are provided with.”

The answer is, don’t deal with a company hidden offshore. But to be fair to estate agents anxious to secure their commission, that is easier said than done. And besides, one agent’s attempts to discover a true owner may not be matched by another’s.

The Government needs to intervene to tighten the law, and oblige the offshore companies to disclose who they’re really acting for. Failure to give the true owner’s name could be met by heavy penalties, such as a repossession order.

If that sounds extreme, that’s because the problem is extreme. We’ve reached a stage where a vast chunk of our real estate is in the hands of people who would be classed as criminals in their own country. They’re using the proceeds of crime to invest in UK property, or they’re breaking laws by moving money overseas. No matter: their chosen dumping ground is here.

They’re pushing up prices, and creating a market that is out of kilter with the domestic economy. That bubble is growing all the time, and such is its fragility, it could burst at any time – with potentially disastrous consequences.

Previously, it was the explosion in lending that provoked alarm in the Bank of England and ultimately, sparked the banking crisis. Now, it’s not borrowing that’s the issue – the controls for UK borrowers are tight and are being adhered to. It’s cash buyers from abroad that are provoking an almighty headache.

The underlying vulnerability of the prime residential property market in London and the South-east is acute. At any moment, those investors might vanish. They have no roots here, no loyalty here. They’re buying because London is a magnet for investment; our regulation is “light touch” – code in international circles for non-existent – and our tax rates are favourable.

Instead of concerning itself with unemployment rates in the Midlands or South-west, or any one of the British measures it chooses to pore over, the Bank of England should be monitoring overseas governments and what they’re up to. That’s of far greater relevance to property values in London and the South-east than some historical British yardstick.

China, for example, has embarked on a massive crackdown on corruption. One of those institutions swept up in the purge is Bank of China, which has been accused of laundering money and not complying with the country’s foreign exchange laws – allegations that the Bank of China denies.

If the Chinese disappeared, if they suddenly stopped buying, the effects on the UK property market could be terrible. By wanting to attract foreign investment too much we’ve laid ourselves wide open to foreigners of dubious provenance, and now we no longer have control over our destiny. That power belongs with drug barons, gangsters, fraudsters, corrupt officials, kidnappers, terrorists. Some of them, if I had a way of checking, might be among my new neighbours.