Arab buyers told to look past luxury London real estate

Wealthy investors should diversify from ‘golden postcodes’ to bump up returns, says agency
Houses along Kensington Palace Gardens, Londons most expensive street according to Zoopla.co.uk
By Claire Ferris-Lay
Tue 06 Dec 2011 08:08 AM

Luxury homes in London’s prime central areas offer
attractive investment opportunities to Arab buyers, but investors should look
beyond the city’s “golden postcodes” to maximise their returns, property
consultancy IP Global said.

Arab Spring unrest has spurred fresh interest in the city’s
luxury properties as wealthy buyers seek a safe haven from the political
turmoil, but investors should broaden their portfolios, the Hong Kong-based
company said in a report.

 “We are encouraging
our clients to diversify their portfolios into new London boroughs, in order to
open up new opportunity,” Robert Pearce, director of IP Global, said in a
statement. “Throughout 2011, GCC investors have increasingly viewed the London
real estate market as a relatively ‘safe haven’ for capital… we expect this
trend to continue into 2012, as Middle Eastern investors seek long-term
stability through real assets, amidst increasing volatility in global
equity and bond markets.”

London
property has long been seen as a safe haven for investment for wealthy Arab
buyers. This interest, coupled with the city’s shrinking number of prime
properties and a weak pound, helped push the value of prime residential
properties to a record in October
, Knight Frank said.

Luxury home prices in the UK capital have soared 40 percent
since March, the consultancy said in November. Values of properties costing an
average of £3.7m ($5.9m) rose by an average of 12.5 percent in October from a
year earlier, the London broker said, bolstered by Arab buyers.

“The ramifications of the Arab Spring are still not fully
played out – buyers from this region are still looking to invest in London,”
the company said.

Harrods
Estates, the property arm of the London-based department store, said in August
a Middle Eastern businessman had signed a lease to rent London’s most expensive
property
at a cost of £55,000 ($90,000) a week.

The firm
said it had seen the average cost of its rented property increase to £4,285
from March to date compared to £1,955 the same period the previous year.

Property
valuations across the capital have produced average annualised
unleveraged returns of 8.1 percent and leveraged
annualised returns of 11.9 percent, IP Global said in its
report.  

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House
prices in the London borough of Islington have outperformed all other areas
with annualised returns of 11.5 percent compared to 2.8 percent in the City of
London, said IP Global.

Other
high performing projects include the Cobb Street, Myrdle Street and Mulberry
projects in Tower Hamlets offering 4.5 percent.

Luxury
development One Hyde Park, which was launched to great fanfare in January,
broke world records for the most expensive price per square foot at £6,000.

Buyers
in the luxurious development, which includes 86 apartments overlooking either
Hyde Park or Harvey Nichols, are said to include Qatar’s Sheikh Hamad Bin Jasim
Jaber Al-Thani and Mohammed Saud Sultan Al Qasimi, head of finance for the
government of Sharjah.

Between
20-25 percent of sales were to Middle East buyers, with the cheapest apartment
in the development costing £5.75m ($9.2m), Arabian Business reported in June.

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