Five ways Middle East buyers are changing London's property market

From video calling to multiple investments, buyers from the region are reshaping the capital's real estate sector

Estate agents Knight Frank have revealed that property prices in prime outer London will grow by about 4 per cent over the rest of 2021, double the rate of prices in prime central London and a development that is changing the balance of the city's market.

The trend has been driven largely by the domestic market but buyers from the Middle East are also contributing to the shift away from central London, according to the analysts.

The National spoke to Stuart Leslie, international sales and marketing director at property developer Barratt London, to discuss the prime expansion and how the changing habits of Middle East buyers are shaping the capital's property scene.

1. Investor interest is returning to London property

Interest from Barratt's Middle Eastern clients in second-tier UK cities such as Manchester and Birmingham increased by 15 per cent between January 2020 and January 2021.

Since then enquiries have fallen 12 per cent, whereas enquiries for property in outer London – zones three to five of the London Underground map – are up 27 per cent.

Mr Leslie says it shows Middle East confidence is returning to the capital and that investment in second-tier cities was regarded as an insurance policy while the pandemic raged.

“[Investors and family offices] tell me they didn't know what the London market was going to do and so were considering second-tier cities … but London has proven so resilient and they know every London suburb is bigger than every second-tier city.”

Mr Leslie describes the sentiment as a reversion to the “tried and tested” and a token of the capital’s perennial appeal, whether for its arts and culture, commerce, education or leisure.

“There’s so much going on here, particularly the infrastructure improvements,” he says, calling the Nine Elms tube station that opened last week one of the “biggest infrastructure changes that we've seen across the country for a long time”.

2. The rise of Zoom property purchases

Before much of the Gulf was placed on the UK's amber list for travel, Middle Eastern investors had to rely on viewing rooms online via Zoom, instead of seeing them in "the fabric".

The barrier hasn’t deterred transacting, however. Video viewings account for 84 per cent of Middle Eastern purchases, up from 3 per cent 12 months ago, Mr Leslie says.

It’s a trend he foresees continuing for at least another six to 12 months and believes it is driven by a “fear of missing out”.

“[Middle Eastern] investors are seeing the markets are continuing to grow,” he says.

“The predictions from all the agents are very positive … and [the investors] didn't want to miss out on that opportunity any longer.

“So that's why we're starting to see some family office investments being done by video or a representative in the UK.”

3. Middle Eastern investors buying multiple properties

“A trend that we're seeing definitely is investors who would normally drop £2 million ($2.73m) or £3m on a property in central London are now purchasing multiple properties in zones three to five,” says Mr Leslie.

Barratt London’s sales ledger is testament to the pattern: 12 multiple property purchases in the last six months from Middle Eastern family offices, compared with one in the 12 months before.

The investors are looking at where the emerging markets are, and it’s really driven by supply and demand

Between six and 10 apartments is the average number per transaction with purchasers seeking strong price growth and a solid rental market. Typical purchase values are between £460,000 and £600,000.

“While the stamp duty holiday no doubt attracted investors to lower value property, we have transacted two of these multiple property sales in the last month,” says Mr Leslie.

“We are currently working with eight family offices from the Middle East, which all own property in London already but are now seeking the best returns on their capital.

“The investors are looking at where the emerging markets are, and it’s really driven by supply and demand so we're building regeneration projects on the outskirts of London.”

These regeneration projects, such as Upton Gardens and Hendon Waterside, have delivered exceptionally high price growth: 84 per cent in the last five years.

The map below shows locations for Barratt's developments in relation to where they lie on a map of the London Underground.

4. Owner-occupiers moving to London’s outer ring

The move away from the centre of London isn’t solely driven by investors; owner-occupiers are looking outward, too, motivated by better value for money and space, but with the convenience of London still 20 to 30 minutes away.

Barratt’s portfolio in north-west London has seen an 11 per cent increase in owner-occupier enquiries from the Middle East.

“[For Middle East markets] there’s always going to be a family home in west London,” says Mr Leslie.

“But the younger generation of Middle East homebuyers are now looking to the north-west corridor out from Paddington, out towards Mill Hill, that sort of area.

“You tend to get a little bit more value for money, but it's also ... a little bit more gentrified, almost country living.”

While owner-occupiers are moving up, many investors are moving east.

Barratt has recorded a significant increase in investor enquiries for its Wembley development – 10 Watkin Road – only a few hundred metres from Wembley Stadium.

5. Middle East buyers placing more emphasis on value

The shift from luxury to value is the common thread running through all the trends.

“[The Middle East market] is not prioritising things like concierges, swimming pools, gyms or lounges any more,” says Mr Leslie.

“They're looking at the different products that are available in the market and saying: ‘Well, no, we don't want to pay eight pounds per square foot on service charge, we're not using the swimming pool, we're not using these facilities.’

“So they're a bit more considered in their investments whereas before it was very much: ‘We want the best of the best and all the bells and whistles'.”

The desire for the appurtenances of luxury wasn’t solely a one-way phenomena, says Mr Leslie, citing how the development industry in London has also grown out of its obsession with the fripperies.

“There was a trend … where everybody just put in swimming pools and fancy concierges and business lounges and all the rest of it.

“And it's not like when you go to the airport. It's nice to be in a lounge but would you not go on the flight because there's not a lounge? Well, of course you would still go on the plane."

Updated: September 24th 2021, 10:28 AM