Money Laundering Directly Linked to Rising House Prices, Study Finds

A groundbreaking new study has revealed that money laundering activity has a direct impact on rising house prices. The research, conducted by the University of Trier in Germany, analyzed suspicious transaction reports submitted by real estate agents and notaries to FIU Deutschland, the country’s financial intelligence unit, and found a strong correlation between increased money laundering activity and higher property prices.

According to the study’s findings, a 10% rise in suspicious transaction reports filed by real estate professionals corresponded with a 1.9% increase in house prices. “Effective anti-money laundering measures would therefore [save] real estate buyers’ money,” the study stated, reinforcing long-held concerns that illicit finance is a key driver of real estate inflation.

For years, researchers have suspected that money laundering contributes to higher property prices, as real estate is widely considered one of the most attractive assets for criminals looking to launder illicit funds. Unlike average buyers, these individuals are often willing and financially equipped to pay inflated prices, creating additional competition in the market. Similar research has previously indicated that billions in criminal funds likely flow through the U.S. housing market, contributing to price increases.

The Institute for Money Laundering and Corruption Criminal Law at the University of Trier emphasized that, while this link had long been “suspected,” there was previously a lack of “evidence-based data” to substantiate it. “This study provides empirical evidence for the first time regarding real estate prices,” the institute stated in its report.

The research focused on the correlation between suspicious activity reports and real estate prices in seven major German cities: Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich, and Stuttgart. Examining a total of 23,722 suspicious transaction reports filed by real estate agents and notaries between 2020 and 2024, the study found a clear connection—when the number of suspicious activity reports increased, so did housing prices.

“This suggests that money laundering is causing prices to rise in the real estate sector,” the report’s authors concluded.

The study also explored the reverse effect, analyzing how a decline in money laundering activity could lead to lower property prices. Using the example of an apartment valued at €360,000, the researchers found that a 10% reduction in suspicious transaction reports would likely result in the price of the home decreasing by €6,800.

These findings highlight the significant “economic consequences” of money laundering, according to the researchers, who stated that they can now “empirically prove” the impact of illicit finance on the real estate market. The study also underscored the importance of real estate agents filing suspicious activity reports with anti-money laundering (AML) authorities, such as financial intelligence units, to help curb criminal activity in the sector.

“Detailed data enabled a sound analysis [of] the real estate sector,” the study concluded, reinforcing the crucial role of transparency and financial oversight in preventing money laundering from further distorting the housing market.

By fLEXI tEAM