Middle Eastern investors are eyeing up property opportunities beyond Prime Central London (PCL) as the pandemic subsides.
While Gulf buyers have historically focused on central London developments, investors are now being drawn to outer London for its capital growth, high rental yield, and speedy commute times, according to British developer Barratt London.
“In the past 18 months, due to restricted movement and lifestyle changes, there has been a shift in demand among Middle Eastern buyers towards higher yield, lower priced properties, indicating a boom in investment purchases,” said Stuart Leslie, international sales and marketing director at Barratt London.
“A trend that we’re seeing is investors who would normally drop £3 million on a property in central London are now purchasing multiple properties in zones three to five,” added Leslie.
Multiple purchases
According to Barratt London, 12 multiple property purchases were transacted in the last six months from Middle Eastern family offices, compared with one in the 12 months before.
Between six and 10 apartments is the average number per transaction with purchasers. While typical purchase values are between £460,000 and £600,000.
Traditionally Gulf buyers, who now make up around 15 percent of Barratt’s sales, have looked to central zone one areas, such as Chelsea, Belgravia and Knightsbridge, said Leslie.
Stuart Leslie, international sales and marketing director at Barratt London.
However, the property firm has seen a move towards Gulf investors purchasing more affordable outer London homes, which offer rental yields of around four percent – higher than central London at 3.6 percent.
Regeneration growth
Barratt London has 12 developments in the UK capital – including High Street Quarter in Hounslow, New Market Place in East Ham and Upton Gardens in Newham – largely situated in regeneration areas.
“There is a lot of new infrastructure being built around brownfield regeneration sites and when you add new community facilities it creates an additional price growth effect,” said Leslie, adding property values in the London Borough of Newham have risen by 28 percent in five years.
Greater yield and returns
Henry Faun, partner at Knight Frank Middle East, said POL areas, such as Newham, are seeing a boom in Gulf investor interest: “In recent years, clients from the Middle East have started to look away from the traditional areas in central London for great value and yield return. Outer areas often provide both of these factors.”
Henry Faun, partner at Knight Frank Middle East.
Faun said Gulf families are notably shifting their real estate buy-to-let portfolios towards East London. “Investors are looking for value and high rental yields and they don’t mind where it is. They are not chasing the golden postcode,” he said.
Real estate in POL is expected to grow in value by four percent in 2021 – double the anticipated growth of the more expensive PCL districts, said Knight Frank.
Non-traditional areas
Jenny Steen, sales director at Irish property developer Ballymore – which has several London projects – said she has noted increased Middle Eastern buyer interest in non-traditional areas such as West London’s The Brentford Project.
“Close to Heathrow airport and next to prestigious areas like Chiswick and Kew, Brentford offers people the chance to buy into great growth opportunities,” said Steen. “It’s an unusual place that is home to natural spaces, as well as proximity to great schools and employment opportunities at a lower price point,” she said.
The Brentford Project (pictured below), an ambitious zone four community regeneration development, which will house hundreds of luxury apartments and 140,000 square foot of retail and leisure facilities, will be completed in incremental stages by 2027.
The Brentford Project appeals to owner-occupiers who would like to rent out if they decide to.
“Middle Eastern buyers are looking at opportunities for growth in West London, which still have parks, green spaces and access to water in an appealing price bracket,” she said. “The Brentford Project appeals to owner-occupiers who would also like to rent out if they decide to.”
Barratt’s Leslie said that Gulf families are looking less “at what zone they are in”, but more towards general transport links, such as to the coast or universities.
“We are focusing our sites a little bit further out representing excellent value for money, which is attractive for both investors and owners occupiers,” he said.
“We didn’t anticipate Middle Eastern interest but what we have seen is a lot of interest in high value properties with good links… it seems like the main home remains in West London and the younger ones go for East London where they get more for their money.”
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