Beyond Brexit: Why UAE buyers want a slice of London property

Interest in London property among foreign investors, especially those from the GCC, has seen a massive spike in recent days thanks to the aftermath of the now-infamous Brexit, or Britain’s decision to exit from the European Union.

However, according to property advisory agency Knight Frank, buyer interest in London isn’t new, and 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 those from the Middle East, it notes.

Over the past few years, even as Russian and Asian buyers have become more active, the interest from the Middle East never waned, it maintains.

“London is a dynamically changing property market and has been a favourite investment destination for buyers from the GCC for decades,” says Victoria Garrett, from Knight Frank International Residential Sales.

“Some of the most iconic buildings and developments are owned by investors from the GCC,” she says.

“Abu Dhabi’s portfolio includes the £400-million 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 being developed by high-end developers Finchatton,” says Garrett.

“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,” she lists.

London remains the destination of choice for high net worth individuals, including those from the GCC.

As well as 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 post the Lehman brother crash as a result of London being invested in for its safe haven status, some GCC investors are looking to buy further afield outside the golden postcode to find value, says Knight Frank.

The agency says it has seen a number of its clients recently investing into East London, where they’re still able to find investments for circa £1,000 (Dh4,500) per square foot in a location close to transport links and with ready tenants on their doorstep.

“This coupled with the changes to infrastructure and public realms”, noted Victoria, “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”.

Why London

Garrett says London it a truly multi-cultural city and boasts some unique benefits. Foremost, London is hailed as a ‘safe-haven’ location on a pure investment basis.

The city has a transparent property market, says Knight Frank, adding that property tenure is clear-cut and underpinned by the legal system. There are also good liquidity levels in every price band compared to some less established global hubs, it states.

UK investment also offers a currency play. “With the current uncertainty that we have seen around the EU referendum we have seen the sterling weakening and investors have been taking advantage of the currency play to invest into the market,” she says.

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 – rivalled only by Paris. The popularity of these establishments is clear, as London has the highest number of overseas students anywhere in Europe.

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.

At the London School of Economics (LSE), a highly regarded institution across the globe, international students make up more than 65 per cent of the student body.

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.