Arab buyers told to look past luxury London real estate

by Claire Ferris-Lay Tuesday, 06 December 2011

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.

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.