London real estate: Spike in GCC investments in residential properties amidst declining mortgage rates

The growing expectations of a cut in base interest rates in September is anticipated to trigger an influx of investors from the Middle East region, London-based industry players said.

Expectations on the start of a new upward price cycle in London’s real estate sector – Savills projected a 20 percent increase in prime London property prices by 2027 – is adding to the build-up in GCC investments in residential assets in the UK capital, one of their historical hot spots.

The Battersea Power Station area, the fast-emerging neighbourhood on the banks of the River Thames – billed as London’s most exciting new neighbourhood – is among the newly preferred investment locations for GCC investors.

“The market is expecting base rates to be cut from September 2024, which will trigger more activity and confidence in the [city’s real estate] market,” Meriam Lock-Necrews, Head of Residential at Battersea Power Station Development Company, told Arabian Business.

“We’ve already seen mortgage rates start to come down, supporting a growth in activity across the London market,” she said.

Senior executives at other developers and real estate consultancies also said property prices, which are already showing a firming up trend, are expected to grow by at least 15 percent over the next five years, making now a good time to buy.

GCC buyers’ London preferences

Industry insiders said of late the demand for prime London properties remains strong, with house prices remaining sturdy over the past few years.

Combined with a reduction in the supply of new homes forecast to be built in London over the coming years, industry players anticipate growth in line with Savills’ projections, influencing a surge in investments from the GCC region.

Interestingly, investors from outside the GCC bloc – from countries such as Jordan – are also contributing to the current surging interest from the Middle East region in real estate assets in various London neighbourhoods.

This marks a variation from the historical trend of GCC investors – from countries like Saudi Arabia, the UAE and Kuwait – dominating property investments in London and the wider UK market.

GCC buyers typically favour two-to-three-bedroom apartments which provide the space for multiple family members to enjoy, with their preferred price range typically between £1.5 – £2.5 million.

Battersea Power Station neighbourhood hogging limelight of late

London remained on top of the list of preferred international markets for real estate investments for high-net-worth individuals from the UAE and Saudi Arabia.

However, historically, these buyers have focused their searches on neighbourhoods such as Knightsbridge, Belgravia and Chelsea.

This, however, is said to be changing, with many investors increasingly preferring new neighbourhoods, with the Battersea area in the London Borough of Wandsworth – around London’s landmark Battersea Power Station – emerging as a top pick.

“Today, buyers expect so much more – they don’t just want to invest in a standalone building, they want lifestyle, security, amenities, and to be able to walk around their own neighbourhood and enjoy what’s on offer.

“As a result, neighbourhoods like Battersea Power Station are becoming increasingly popular,” Lock-Necrews said.

Even since the Battersea Power Station was opened to the public in October 2022, the neighbourhood has become one of the must-visit destinations in Central London.

The neighbourhood now has over 140 retailers, restaurants, cafes and leisure experiences, which have been key drivers to attract purchasers from the MENA region.

“There has always been high demand from GCC purchasers at Battersea Power Station, thanks to our mixed-use neighbourhood offering and high-quality product.

“This year, however, we’ve seen an increase in demand of over five percent, and we anticipate higher growth in subsequent years,” said the senior executive of Battersea Power Station Development Company, which is implementing an ambitious development plan for the area to make it one of the most sought-after shopping, leisure and investment destinations in London.

She said the GCC – and the Middle East – buyers are especially interested in having high-end shops, amazing restaurants and unique events and activities on their doorstep, as well as fantastic access to green space, the River Thames and fast transport connections.

“Battersea Power Station offers the combination of a unique, high-quality home in a buzzing, curated neighbourhood, which cannot be found at this scale anywhere else in central London,” she said.

Lock-Necrews said approximately 50 percent of buyers at Battersea Power Station are British, and the remaining 50 percent of buyers are international.

The senior company executive, however, declined to provide a breakdown of international buyers by region.

Lock-Necrews said house prices in the Battersea Power Station area are expected to see a significant increase in the coming months and years.

“Historically, we have outperformed the broader market, achieving a 50 percent growth in property values from 2017 – 2022 within the first phase of the development and we expect this to continue,” she said.

“We consider owning an apartment at Battersea Power Station like owning a piece of art.”