Illicit funds entering the UK housing market are inflating property prices by an estimated £3,000 nationally, and up to £11,000 per property in London, according to new research from SmartSearch.

The digital compliance firm’s analysis has found that money laundering and illicit wealth are making home ownership increasingly unattainable for ordinary families by driving up prices.

Since 2016, more than £11bn in suspicious wealth has flowed into UK real estate, more than half of which has come from shell companies registered in British overseas territories.

In total, more than 87,000 properties in England and Wales are now owned by anonymous firms based in tax havens, with an estimated collective value exceeding £100bn.

The issue is especially severe in London, where 40% of anonymously owned properties are located.

According to Phil Cotter, chief executive of SmartSearch, in some prime areas of London, dirty money has inflated prices by up to 20%.

“In boroughs like Westminster and Kensington & Chelsea, offshore buyers have created so-called ‘lights-out streets’, where luxury homes sit empty while local communities suffer,” he said.

“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.

“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.”

SmartSearch also warned that estate agents were failing to stop dirty money from entering the UK market. This warning comes after 200 estate agents were fined over £1m for breaches of anti-money laundering (AML) regulations.

Analysis of the HMRC Supervised Business Register shows that 3,400 (14%) agents are not AML registered, while over half (around 11,000) do not always run verification checks.

Cotter added: “If estate agents don’t take their AML responsibilities seriously, the UK property market will remain a magnet for dirty money.

“With thousands of agents still unregistered or failing to carry out even basic checks, we’re allowing criminals to distort the market, and its ordinary people who are paying the price.

“We recognise the pressures estate agents are under, which is why we’re committed to helping them navigate AML regulations and protect all involved. These regulations are not a burden, but a vital tool to stop criminals from distorting our market.”