Gulf investors play waiting game with London realty

For wealthy investors in the Gulf, UK’s shock Brexit move could well be another reason to keep investing in prime London real estate. And with the UK currency remaining under severe pressure, they could use their dollar-pegged advantage to pick up some significant savings on such deals.

“On a £5-million property investment in the UK, there could be dollar savings of up to $900,000 purely because of the currency swing,” said Faisal Durrani, Head of Research at Cluttons, the consultancy. “Since the Brexit results, there have been Kuwaiti and Qatari investors scouting around for high-value investments in Belgravia and Chelsea. Prior to Brexit and the pound’s decline, they might have been priced out from looking at these locations.

“With Brexit, an instant currency discount of 12-13 per cent has opened up. Brexit has certainly not weakened the Gulf investors’ interest in London — it’s right up there as a choice when it comes to an overseas destination to commit $1 million and more on property.” [Regional buyers account for around 10-15 per cent of overseas buyers acquiring residential property in Central London]

There are also those “opportunistic buyers” who are waiting until London property values dip further, as many have predicted once the full impact of the Brexit decision is factored in. “Gulf investors typically do not rush to close a deal — this time they could hold back because they feel the pound might slip further or London property values might undergo a correction.”

But Durrani says London property values have already gone through an average 1.5 per cent decline, while for those valued at and upwards of £4 million, the drop has averaged 5-7 per cent.

But against that comes the full weight of history — property investors have seen a 70 per cent increase on their assets over the last seven years. And taking it over a 20-year time frame, they would have recouped a staggering 285 per cent on their London homes.

In the first six months, the UK property market was particularly active with 10,500 off-plan or newly completed homes being transacted. It was the second best tally in the last seven years, except for in H1-15, which was higher by 25 per cent. No numbers have yet to come through on the deal flows that have taken place after the June 23 Brexit vote.

But Durrani is categorical in stating that there haven’t been any panic selling. “What Brexit did was to amplify a slowdown that was already there in London property. It’s highly unlikely that the 100,000-odd people in the city’s banking and financial services sector will overnight shift to Dublin, Frankfurt or another European city and London loses its crown as the capital of the financial industry,” he said.

“For one, there aren’t that much of office or residential space available in any of the other cities. Brexit could instead be more of a long-drawn out process. Our forecast for the UK economy is a mild technical recession in this quarter and a 0.1 per cent GDP (gross domestic product) growth for the whole year. But the UK economy was only averaging between 0.2 per cent and 0.6 per cent growth each quarter since the recession.”

Outside of London, regional investors — including expatriates — lay great store in snapping up possible overseas deals in New York and Singapore. Indian realty — specifically, the metropolises of Bengaluru, Mumbai and New Delhi, and in that order — also figures as a prime destination where wealthy NRI investors here could park their funds. And the majority prefer to do so in residential assets.

These are based on a Middle East Private Capital Survey, carried out by Cluttons in partnership with YouGov. The polling was done just before the Brexit vote took place. For this poll, respondents — featuring those with $1 million and more in investable funds — were only asked to choose locations outside of the Gulf markets.

Source: Manoj Nair, Associate Editor,


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