The lure of UK's real estate will remain intact

There has long been a trend for overseas buyers to purchase homes or investment properties in central London. In the 1980s, Americans dominated the international market, as did investors from the Middle East. Over the past few years, Russian and Asian buyers have become more active, but the interest from the Middle East has never waned.

Some of the most iconic buildings and developments are owned by investors from the GCC. Qatar is one of the most high-profile investors in London, owning landmarks such as the Shard skyscraper, Harrods department store and Olympic Village, as well as luxury hotels. A Qatari lead consortium bought the Canary Wharf financial district last year and Qatar Diar are the developers behind Chelsea Barracks and Southbank Place.

While the Qatar Investment Authority’s (QIA’s) wealth fund has been diversifying its portfolio away from Europe towards more investments in the US and Asia in the last couple of years, it is still heavily invested in Britain and holds stakes in Barclays, Royal Dutch Shell and Sainsbury’s.

The QIA has $256 billion (Dh940 billion) of assets under management globally, according to the Sovereign Wealth Fund Institute (SWFI). It has at least $7 billion directly invested in equities traded on the London Stock Exchange, in which it also holds a 10.3 per cent stake, according to Thomson Reuters data.

Kuwait Investment Authority, which has $592 billion in assets under management according to SWFI, is also a major investor though its London-based Kuwait Investment Office. In 2013 it was said the fund had more than doubled its investment in Britain over the previous 10 years to more than $24 billion. Like Qatar, Kuwait owns London landmarks such as the More One riverside development, which houses the headquarters of the Mayor, as well as buildings in Canary Wharf.

Abu Dhabi’s portfolio includes the £400 million (Dh1.9 billion) Berkeley Square Estate, purchased in 2001, which consists of the square and surrounding buildings. Abu Dhabi is also funding the £200 million conversion of the former US Naval Headquarters in Grosvenor Square into luxury apartments and penthouses — a project being developed by high-end developers Finchatton.

Besides large-scale Arab investments, GCC investors have traditionally bought properties in Knightsbridge, Chelsea, Mayfair and Belgravia. However, having seen a staggering 53 per cent growth between 2009 and 2012, some GCC investors are looking to buy further afield outside the golden postcode to find value.

Knight Frank has seen a number of clients recently investing in East London, where they’re still able to find investments for circa £1,000 per square foot in a great location close to transport links and with ready tenants on their doorstep. “This coupled with the changes to infrastructure and public realms, we are forecasting a 26.4 per cent growth between now and 2020 in East London with yields of circa 4 per cent, making it a very attractive proposition.

On a pure investment basis, London has a transparent property market. Property tenure is clear-cut and underpinned by the legal system. Given that it is such an established market, there are also good liquidity levels in every price band compared to some less established global hubs.

The lure of the world-renowned schools and universities in and around London cannot be overstated. A third of buyers of off-plan new build properties do so with their children’s education in mind. In many cases, the property or properties will be used by their offspring while they study at a university, and then rented out once the child or children move elsewhere or return home.

If the children are not yet at the correct age for university, the property will be rented out until they are.

London is among the top cities when it comes to tertiary education — it boasts 12 universities ranked in the top 700 world institutions, according to QS World University Rankings — rivalled only by Paris. The popularity of these establishments is clear, as London has the highest number of overseas students anywhere in Europe.

The lure of a British education is nothing new, and many investors may have been educated in the UK themselves, or have family or friends who have done so.

Also check out the Monaco-style luxury resort in Oman

Source: Victoria Garrett, Special to gulfnews.comGN

The writer is Associate Partner at Knight Frank


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