By Andrew Jones
Middle East Ultra High Net Worth investors (UHNWIs) poured $3.3bn into London's real estate market in 2018, according to a Knight Frank report
In an environment where investors continue to hunt for yields whilst also balancing portfolio risks due to uncertainties, Middle East investors continue to seek assets in London due to its safe-haven status.
This was evidenced in Knight Frank’s Wealth Report 2019 which found that UHNWIs from the region allocated $3.3bn 2018 to property in London, despite concerns around Brexit, taking advantage of a favourable currency environment with strengthening dollar-pegged exchange rates against a weakening sterling.
With speculation continuing around a potential “Hard Brexit” or “no Brexit”, there are good reasons to believe that London will retain its status as a leading global city, financial hub and property investment destination. Its strong fundamentals mean that the London remains Europe’s number one tech hub for unicorn companies and attracted more foreign direct investment than any other city in 2018, as the latest data compiled by London & Partners found.
The latest research by technology and investment advisory firm, GP Bullhound, also showed that London’s technology ecosystem has helped 17 companies surpass the $1bn valuation mark since 2010, over double the amount of other major tech cities such as Berlin (7) and Paris (4).
In terms of our own experiences, back in 2012 we began one of the world’s largest redevelopment projects with Battersea Power Station, one of London’s most iconic landmarks which lay idle for three decades. This £9bn ($11.4bn) project will create a new town centre for London on the banks of the River Thames, a short walk from Chelsea and a mile away from the traditional “golden triangle” of Mayfair, Belgravia and Knightsbridge.
As the largest regeneration project in Europe, we have seen high levels of interest from the Middle East investors and have sold in excess of £125m ($158.7m) of residential property in the past year with, alongside British buyers, a significant proportion going to Gulf investors despite ongoing uncertainties surrounding Brexit.
Given that the region has a very large expatriate community, many of them also seek relocation opportunities
Nearly 90 percent of apartments that have been put on sale have been sold, including nearly all of the 865 apartments in Phase One where only a couple of penthouses remain. Phase Three, which is one of our main focuses at the moment, has seen 70 percent of its available flats sold, with investors drawn to the idea of owning a one-of-a-kind Frank-Gehry designed home, or a piece of English history in Foster + Partners’ iconic new building.
Investors from this region are also attracted to the exciting selection of restaurants, cafes, bars and shops that are opening up here. Already we have some of the best chefs in London running new restaurants along the riverfront. The Power Station will have over 100 new shops as well as a food hall, cinema and events spaces, making this one of the most exciting new retail destinations in London. They love having the 200-acre Battersea Park on their doorstep and the world-class shops and designer stores of Knightsbridge, Belgravia and Chelsea a short stroll away.
Purchasers are also drawn to the strong sense of community that is emerging at Battersea Power Station. Residents and their families feel safe, secure and welcome here. They can step outside their front door and enjoy acres of open space right on the riverfront, which is highly unusual for such a prime central London location.
The redeveloped Power Station will also become Apple’s London campus in 2021, providing further evidence that London’s status as a commercial centre remains intact in the eyes of international businesses. In fact, with 25,000 people living and working on site when the project is complete, it will deliver an estimated £20bn ($25.4bn) boost to the British economy, creating 20,000 new jobs as well as providing a new Zone One London Underground Station.
We are also contributing over £200m ($253.9m) to fund the Northern Line Extension and we now have our own River Bus Pier, making this previously inaccessible location an increasingly well-connected part of the capital.
The Middle East is an important market, given that Knight Frank’s most recent wealth report projects that the number of Ultra High Net Worth Individuals (those with wealth over $30m) in the region is expected to grow by 20 percent by 2023. Given that the region has a very large expatriate community, many of them also seek relocation opportunities and the research found that 24 percent of them are seeking emigration with the UK being the most preferred destination. In the Middle East, 74% of UHNWIs own a second home abroad, according to Knight Frank, higher than any other region in the world. Additionally, 55 percent of them are also looking to make foreign investments, with the UK real estate still the top choice.
London’s attractive fundamentals won’t change regardless of whatever happens with Brexit
In addition, a significant proportion of investors from the Middle East are the non-residential Indian community, who continue to grow and diversify their portfolio geographically. This group in particular generally favour UK real estate investments, with the UK also providing access to world class education opportunities for their children, in addition to new business ventures and stable investment returns.
The Middle East is a region where a high proportion of families send their children abroad for tertiary education and in this context, London draws significant interest.
As Middle East investors continue to look for the best opportunities abroad and real estate remains one of their more preferred asset classes, they will be aware that London’s attractive fundamentals are not going to change regardless of whatever happens with Brexit.
Hence, it is a city, which will remain a top choice for regional investors.