Middle Eastern buyers are returning to London's property market to buy homes, research released yesterday showed.
Buyers from the Middle East accounted for 16 per cent of prime central London house sales in the fourth quarter of last year versus 3 per cent in the first quarter of last year, according to a report by CBRE.
"The Middle East is increasingly becoming a source of strong and growing demand for London residential [property]," said Mark Collins, CBRE's head of residential. "There has been a steady flow of capital into the Middle Eastern financial centres and we anticipate that a significant proportion will end up in London residential.
"Undeniably, the low value of sterling is a key driver behind the strong demand. Over the last four years, the pound has fallen by 32.5 per cent against the Saudi riyal, for example, effectively discounting property prices by a third."
South East Asia is still the main source of demand for newly built homes in central London, CBRE said.
The average house price in central London is now £820,200 (Dh4.7 million), after a 2.3 per cent increase in the first quarter of this year, according to CBRE.
"Prolonged demand from overseas investors has maintained the upward pressure on house prices in central London, which are now 16 per cent above their 2007 peak," CBRE said.
Prices of prime central London residential property increased by 1.1 per cent in April on the previous month, according to the property agency Knight Frank.
"Prime central London property prices have been rising strongly for three years, on the back of foreign demand and London's status as a safe haven for investors," said Liam Bailey, the head of residential research for Knight Frank.
However, there are concerns that an increased stamp duty of 7 per cent on homes worth more than £2m for individuals and 15 per cent for property bought through a company could impair sales.
"Buyers at the top end of the market will clearly review their investment strategies, which could cause some stickiness, but the merits of the London market outweigh the tax disadvantage because it is a safe haven for stable long-term investments," said Mr Collins at CBRE.
rbundhun@thenational.ae
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INDIA SQUAD
Rohit Sharma (captain), Shikhar Dhawan (vice-captain), KL Rahul, Suresh Raina, Manish Pandey, Dinesh Karthik (wicketkeeper), Deepak Hooda, Washington Sundar, Yuzvendra Chahal, Axar Patel, Vijay Shankar, Shardul Thakur, Jaydev Unadkat, Mohammad Siraj and Rishabh Pant (wicketkeeper)
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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The jiu-jitsu men’s team: Faisal Al Ketbi, Zayed Al Kaabi, Yahia Al Hammadi, Taleb Al Kirbi, Obaid Al Nuaimi, Omar Al Fadhli, Zayed Al Mansoori, Saeed Al Mazroui, Ibrahim Al Hosani, Mohammed Al Qubaisi, Salem Al Suwaidi, Khalfan Belhol, Saood Al Hammadi.
Women’s team: Mouza Al Shamsi, Wadeema Al Yafei, Reem Al Hashmi, Mahra Al Hanaei, Bashayer Al Matrooshi, Hessa Thani, Salwa Al Ali.
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