MidEast buyers spur luxury London property boom

Real estate prices in central London increased the most in nine months in August as wealthy investors sought a safe haven for their assets amid fears of a global recession, Knight Frank said.

Values of houses and apartments costing an average of £3.7m ($6m) rose 10.5 percent in the 12 months through August, the London-based consultancy said, bolstered in part by Arab buyers.

“Middle Eastern investors definitely have a sector of the market. Overseas buyers in general are boosting London property prices there is just no question about that,” Grainne Gilmore, head of UK residential research at Knight Frank, told Arabian Business.

“Prime London property is an investments class of its own now, it’s decoupled from the rest of the UK market and it more closely resembles other safe haven investments.”

The weakness of the pound coupled with fears of a global recession and low base rate have helped push up the value of London’s prime residential properties, the broker said in its August index report. Real estate prices in the capital have increased 36.3 percent since their recent post-credit crunch low in March 2009, said Knight Frank.

New buyers increased 11 percent in August compared to the same period the previous year while viewings and offers increased 23 percent and 13 percent, respectively, said the report.

“While purchasers buying with sterling are now paying prices in excess of 2008 peak prices, eurozone buyers are still able to achieve a 10 percent discount on 2008 prices and US dollar buyers an 18 percent discount,” said the report.

The UK’s recent riots have failed to dampen demand for London real estate, which has a potential for significant double-digit growth rate by the end of the year.

“It is too early to see any firm evidence, but the riots seem unlikely to dent most international buyers’ desire for property in the city,” said Knight Frank.

London property has long been seen as a safe haven for investment for wealthy GCC investors. Real estate consultancy Savills in June said MENA homeowners hold 13 percent of London’s most expensive property by value with an average spend of £4m.

Harrods Estates, the property arm of the London-based department store, last week said 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.

The company said it had seen a surge in demand from investors from the Middle East, Asia and Russia. “Some 89 percent of our sales are from high-net-worth individuals from overseas, particularly Russia, Middle East and Asia, where we achieve our highest sales,” Shirley Humphrey, sales and marketing director of Harrods Estates, said in a statement.

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.