Political upheaval found to have direct impact on value of property in certain districts
Political upheaval across the Middle East has led to a direct increase in property prices in certain London districts, as investors seek a safe haven for their capital, new research has shown.
A study by Oxford University’s Said Business School found that inflows of foreign capital from regions including the Middle East, China, Russia and southern Europe had led to annual house price growth in the British capital of around 10 percent.
Violent unrest in Arab states including Egypt, Syria and Libya has increasingly led to wealthy investors in these countries parking their capital in so-called safe havens, such as the UAE and the UK, prior research has shown.
However, the study by Said Business School was able to map how capital flight from such countries was affecting particular London districts on a granular level by using a combination of official census statistics and property transaction data.
The investigation found that in the months directly following a marked uptick in political risk in an investor’s home country, property prices in these London districts rose by up to half a percentage point.
Examples included west London’s Little Venice, which has a high concentration of wealthy Middle Eastern residents, as well as less well-heeled areas like Edgware Road, Wood Green and Wimbledon Park.
“The granular level at which we have analysed the data allows us to confirm that safe-haven demand effects from southern Europe, China, the Middle East, Russia, and South Asia are indeed important factors in explaining the dynamics of London house prices,” commented Professor Tarun Ramadorai, professor of financial economics at Said Business School.