MidEast buyers behind 15% of London luxury deals

Arab investors among most active in capital city's £10m+ real estate market - Knight Frank

(Photo for illustrative purposes only)

(Photo for illustrative purposes only)

Middle East investors made up more than 15 percent of London's super-prime real estate market between 2010-2012, according to a new report by Knight Frank.

Only buyers from the UK (33 percent) and Russia (18.7 percent) were more active in the £10m-plus property sector, the study showed.

It added that the UK's proposed "Mansion Tax", which will mean some wealthy Arab buyers who have bought upmarket UK homes could be faced with an annual fee of up to £140,000 ($222,466) is likely to have an impact on future buying trends from overseas investors.

Most Arab buyers invest in UK property through holding companies, which means a lot of Arab owners will be directly impacted by the legislation when it is slated to come into effect next year.

In a survey of wealth advisers, including tax accountants and lawyers, 88 percent cited the UK's changing tax environment as the strongest negative influence on buying UK real estate.

Although 87 percent said they believed clients would wait for the outcome of the consultation on the proposed changes, 67 percent said there was eithersome or much evidence of them looking totransfer ownership to a trust.

Another 50 percent said the same with regard to clients transferring to an individual, and 27 percent to a partnership, Knight Frank said.

In recent years, London has become increasingly regarded by the world’s wealthy as an appealing place to invest in prime property because it offers a safe haven in a world where geopolitical uprisings and economic crises have become commonplace.

According to the report, geopolitical and security concerns in other countries were cited as the most positive influence on those considering buying or renting super-prime property in London.

Prices in the £10m+ market have risen risen 9.4 percent in the 12 months to August but the growth rate is slowing, Knight Frank said.

Annual price growth hit more than 12 percent in November last year, but has since fallen back to sit at below 10 percent over the last six months, it added.

"With international buyers representing an increasingly important source of demand in the market, we asked respondents which nationalities they thought would become more prevalent. The most frequently mentioned were buyers from Russia and the CIS, China, Middle East, France, India and Africa," the report said.

"Looking to the future, our view is that price trends are likely to remain fairly subdued over the next 12 to 18 months. We have set our forecast for zero percent growth in 2013, with a return to positive growth from 2014 and beyond," the report added.

The super-prime London residential market is relatively tightly contained in a number of key postcodes in south west and west London - SW1 accounting for 29 percent of the total.

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