Bargain hunt

zoom

London, once the playground of rich Middle East real estate buyers, has been hit hard by the global credit crunch and the subsequent retreat of foreign capital. Now, however, there are signs that confidence is returning — and Arab property investors are leading the charge.

Despite the ongoing decline of prices in the UK property market, there is emerging evidence that Arabs are beginning to look to London once again, particularly with regards to ‘grade-A’ period properties — the lavish multimillion dollar residences of the capital’s most prestigious boroughs.

The surge has been attributed to the strength of the US dollar relative to the British pound, as well as falling prices in the UK capital as the global economic slowdown impacts jobs and valuations.

“Activity has picked up,” says Noel Flint, head of sales at the exclusive Knightsbridge office of global property consultant Knight Frank. “Arab interest is fuelled by currency fluctuations — theirs are dollar-based economies, and because prices have come off [their peak] too, there is an element of double reduction.”

In the last quarter, Flint sold a mansion in fashionable Chelsea to an Arab buyer for a cool £8m ($11.7m). Today, he is near to closing another huge deal with a different Middle Eastern client and he is not the only agent to have noted the upturn.

“We have seen quite a lot of interest from the Middle East, and we are regularly talking to people in the Middle East about coming over and having a look,” says Jonathan Hewlett, head of London sales at Savills estate agents.

“We’ve seen all grades, from members of the royal family to people wanting to buy two-bedroom flats,” he continues. “There have been more potential buyers from the Middle East in the market, in percentage terms, than we saw this time a year ago.”

Since last summer the pound has lost nearly 30 percent of its value against the dollar-pegged Gulf currencies, representing a significant discount for investors looking to pick up UK assets. Meanwhile, on an annual comparison, house prices in London’s prime sector — houses above £1m ($1.5m) — fell 23.9 percent in April, according to Knight Frank. The consultancy expects a further drop of 10 percent in the secondary ‘new build’ market.

It is all a far cry from 2006, when grade-A period housing was fashionable office space for London’s burgeoning population of cash-rich hedge funds in the West End.

Soaring demand from the city’s boutique financial services occupiers was matched by strong interest from overseas, as Russian, Irish and Middle Eastern buyers eagerly pumped in money to own trophy assets in Mayfair and further afield in Knightsbridge and Belgravia.

A year later, however, the first signs of the onrushing global credit crisis began to erode the confidence in the market. Transaction levels and prices fell in both the super-prime residential sector and in commercial property and Arab money, like other foreign capital, sat on the sidelines.

Today, agents are hoping that the reduction in the prices, coupled with a weak British pound, may just be enough to tempt those buyers back into the market.

In a recent report, Knight Frank said that investor interest from the Middle East, India, Russia and Kazakhstan, which declined severely in the final quarter of 2008, rose between 50 and 100 percent in January 2009 on a year-on-year basis.

In the 12 months to March 31 2009, London residential property deals on behalf of Middle East clients rose 19 percent on the previous year, according to the figures compiled by the consultancy’s research department.

The Arab influx has not been lost on agents keen to take advantage of what little action there is in the housing market at the moment. At last week’s Cityscape real estate exhibition in Abu Dhabi, there was a steady stream of potential investors at the stand of UK agent Hamptons International, the firm snapped up by UAE developer Emaar for $153.5m in 2006.

Print | Email | Discuss this article

| Share |

READERS' COMMENTS

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic. Arabian Business would like to point out that only comments relevant to the story will be published. Any containing personal insults or inappropriate language will not be approved.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Enter the words above *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM