Middle East investors hunt for property bargains in the UK

Photo: World Property Journal

 

Middle Eastern investors are putting their money into UK property now hoping they can take advantage of the weak pound and softening prices in the run-up to Britain’s plan to leave the European Union in March 2019. Those currently buying in dollar-linked currencies are enjoying a big discount when buying properties in the UK owing to favourable exchange rates.

“Middle Eastern buyers always feel comfortable investing in central London properties. They are effectively US dollar purchasers owing to the fixed currency peg. Banks are also very supportive of lending. Regardless of Brexit, the pound has taken a hit and there is limited supply of properties. Even if there is a ‘no deal’ Brexit, it will only be a temporary shock and life will go on because the London market is so buoyant,” says Vikram Shroff, director, Regal Group, and an investor in Signature Developers.

Identifying the need to tap a potential client base in the GCC, Regal London, a London developer, has made its foray into the Middle East market with the launch of its office in Downtown Dubai. Over the past 5 years, around 12 per cent of Regal London sales have been buyers from the Middle East.

“Investors in the region have a great opportunity to buy property in London, one of the world’s most popular ultra-prime real estate markets, leveraging the favourable currency exchange rates as well as the recent price corrections,” remarks Behrang Jalali, director – Mena, Regal London.

Regal London has delivered 1,750 new homes in London over 2 decades. It has over 1,500 residential units in the development pipeline.

However, there are worries whether UK property prices would crash in the event of a ‘no deal’ Brexit.

“A no-deal Brexit would cause a period of economic and political uncertainty in the UK, and this could weigh on pricing. However, the fundamentals underpinning the housing market across the UK remain in place, especially the need for additional housing in areas which have been undersupplied in the past. There is also potential for outperformance in areas which are seeing stronger economic growth and where affordability is less stretched, and around transport or other infrastructure upgrades,” observes Gráinne Gilmore, partner, head of UK residential research, Knight Frank.

According to the consultancy, values are down 4 per cent on the year in prime central London. “It is noticeable that the number of people registering to buy a home in prime central London has been rising in recent months, suggesting pent-up demand which could be released once the Brexit uncertainty recedes,” adds Gilmore.

On average, UK house prices are up around 3.5 per cent in the 12 months to September, while London prices have dipped by 0.7 per cent, according to Knight Frank data. However, headline figures don’t always show the full picture. For example, average prices are up 7.8 per cent in Leicester and 6.7 per cent in Coventry. Some 15 of the 33 boroughs in London are still seeing price growth, estimates Knight Frank.

Highlighting the supply-demand mismatch, Regal London’s Jalali says the city’s current population is 8.8 million and it is estimated to grow by 11.5 per cent over the next 10 years to 9.8 million by 2028.

“The London Mayor estimates the city needs 66,000 new homes every year. However, only 20,000 new homes have been delivered on average every year for the past 10 years. Therefore, the market fundamentals are very strong,” he continues.

The developer sells homes in the price range of £500,000 to £3 million and its clients range from people buying a second home, those with children studying in London and others who purchase for investment.

“If you have a long-term view and understand the fundamentals of the London property market, then the current uncertainty presents value. But if you are looking for a stable income, it’s better to wait until the current volatility ends,” suggests Shroff.

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