Revealed: A property buyer’s guide to London

In the aftermath of the UK General Election, CBRE’s UK residential chairman reveals the property ‘sweet spots’ expected to lure Middle Eastern investors, and why
Revealed: A property buyer’s guide to London
By Mark Collins
Wed 03 Jun 2015 04:34 PM

When Middle Eastern investors arrived in London in the 1970s they were synonymous with the `Golden Post Codes’ covering Mayfair, Knightsbridge and Belgravia.

Post codes were important – people residing in SW1 could say their neighbours included royalty, prime ministers and lords. Since then, new areas have been added to the list of Golden Post Codes, including Chelsea, Bayswater and even Notting Hill.

But the range of options for Middle Eastern buyers in London has now expanded further, with a younger generation keen to buy new-build apartments in Fitzrovia north of Oxford Street, Covent Garden, the South Bank of the Thames and Canary Wharf in Docklands.

Middle Eastern buyers of London real estate are also drawn to buying residential property in or near Central Business Districts. This is a successful approach to investment property that they have replicated from their home cities and also assures the buyer of future rental growth potential. As an illustration of this, St George’s London Dock in Wapping, directly between the City and Canary Wharf, has seen an influx of buyers from the Gulf region - including both owner occupiers and rental investors – as a direct result of its proximity to these CBDs. This is further endorsement of London’s status as a global financial hub.

Combine this spread of interest with the sharp upswing in activity in London after the Conservatives’ unexpected election win – pollsters said David Cameron had less than a five percent chance of a clear majority – and there has never been so much Middle Eastern interest in our capital.

At the same time, British buyers are also buoying up the London market, having returned in force to buy off-plan two years ago when the UK economic recovery really picked up.

So what are the Middle Eastern `sweet spots’?

There appear to be three: first, the sub $3 million (£2 million) Central London apartment at a development like London Dock – a project that will see Rupert Murdoch’s former News International HQ redeveloped within walking distance of the City financial district.

Admiral Wharf and Clipper Wharf in London Dock

Next, the three-bedroom, $7.6 million (£5 million) apartment also within Central London but outside the Golden Post Codes, in West End areas such as Fitzrovia and Covent Garden and with good access to the best restaurants and cultural treats, has a strong appeal. With many investors buying these homes as a family base for three or four months of the year, variety needs to be on the menu.

Finally, the super-apartment such as the penthouse at the top of the famous Centre Point tower at the junction of Oxford Street and Tottenham Court Road also has a strong appeal as a long-term trophy investment.

The key to Centre Point and many of the other locations favoured by younger Middle Eastern investors is Crossrail. Our new rail route under London from Heathrow in the west to Woolwich in the east will `shrink’ Central London, dramatically cutting travel times.

A trip from Paddington to the west of Central London to Canary Wharf to the east now takes 40 minutes on a good day. When Crossrail opens in 2018 the journey time will be cut to 17 minutes.

Middle Eastern buyers ‘get’ infrastructure: no one understands the transformative effects of improved transport more than people who have seen the dramatic improvements in their own region over the last 25 years.

If Middle Eastern buyers of property are spreading across London in the wake of the General Election, what are developers from the region doing to capitalise as well?

Qatari Diar’s Chelsea Barracks is now progressing, and with UAE developer Damac Properties advancing plans for its Tower 50 project at Nine Elms on the South Bank a new breed of Middle Eastern-backed developments is under way.

Developers from the region want to spread their risk and diversify, and see London as the ideal safe haven. They like the confidence shown across the globe in the UK market.

This has seen house prices rise by 143 percent in the last 10 years in Westminster, 20 percent in the last year in Lambeth and 16 percent in the last year in Wandsworth (which includes Nine Elms).

Although Chelsea Barracks is a low-rise scheme, Middle Eastern developers generally want to build towers in London that can be marked out by new levels of luxury and lifestyle, and offering trophy assets that stand out from the crowd.

In a globally competitive market, Middle Eastern developers understand the need to create projects that are distinctive – but they are also interested in mid-market projects that are available to rent.

With many middle-income Londoners unable to afford mortgage finance or large deposits to buy their own homes, Middle Eastern investors are also interested in the steady income stream from flats let to young professionals. Qatari Diar’s East Village – originally built to house athletes for the 2012 London Olympics – is a case in point.

London is changing before our eyes: many visitors remark that it is rapidly becoming a high-rise city, and Middle Eastern buyers and developers are in the vanguard of that transformation.

Mark Collins, chairman of UK Residential at CBRE.

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