Gulf demand for London property soars but deals 'won't happen' until flight curbs ease
Britain's red list travel rule stops buyers from committing to sales, experts say
When the busy skies between the Arabian Gulf and London open up, property agents and developers are hoping to cash in on soaring demand from Gulf buyers for luxury homes in London.
The market is poised for a surge in transactions with GCC buyers after developers ramped up their marketing campaigns to the region in the run-up to Britain easing its travel restrictions.
However, Britain’s traffic light system – with green, amber and red sets of categories governing travel into the country – placed the UAE and other Gulf countries on the red list, which stipulates that passengers arriving from those countries must quarantine in a hotel for 10 days.
Stan Ennor-Glynn, head of international residential sales in the Middle East department of property consultancy Savills, said the news was a blow for the market, which was expecting a summer of unleashed pent-up demand after a year of restrictions.
“A month ago, we thought flights were going to open up, everyone would be able to travel to the UK and we were going to have a real run of deals,” Mr Ennor-Glynn told The National.
“There is so much pent-up demand in the Middle East and the fact that people have not been able to travel has had a real impact on the amount of deals we have been able to do. We will not see the run we were expecting until everything opens up.”
Savills is running seven marketing campaigns for prime central London developers in the Gulf region, which has boosted interest in the UK capital – already popular with Middle East buyers.
While the appetite is there, Mr Ennor-Glynn said “the urgency is not”, with buyers unwilling to commit until they can travel.
“There is a huge amount of interest but until people actually get on planes and go and view, feel and touch the product, I do not really think we are going to be seeing as many transactions as we would like.”
Despite the hesitancy among Gulf buyers, the super-wealthy spent more on luxury homes in London last year than in any other city across the globe, according to April data from property consultancy Knight Frank.
International buyers spent almost $4 billion on super-prime properties in the UK capital in 2020, with London's most expensive penthouse at Knightsbridge's One Hyde Park recently placed on the market by British property mogul Nick Candy for £175 million ($246.3m).
While a UK-UAE air corridor late last year allowed UAE travellers to fly into Britain without going into quarantine, the situation changed in January when England was plunged into its third national lockdown.
The government also enforced stricter regulations, with passengers travelling from destinations around the globe, including Gulf countries, expected to quarantine in a hotel close to the airport for 10 days.
Mr Ennor-Glynn said many Gulf residents planned to travel straight after the Eid holidays and spend their summer in the UK during the hotter months.
The continued travel restrictions are now preventing property deals worth more than £1m from getting across the line.
“They are just not going to transact on the bigger deals,” he said. “We have seen a lot of leads being generated, particularly from Saudi Arabia, but in terms of being able to convert them, it has been slightly tricky because it is very hard to get someone to come in out of a brochure or a Zoom.”
Mr Ennor-Glynn said the Gulf region is slightly different from other parts of the world because it takes time to build up trust before buyers commit to a transaction – a relationship normally forged through face-to-face meetings.
It’s very hard to on-board clients just doing Zoom.
Stan Ennor-Glynn, Savills
“It is very hard to on-board clients just doing Zoom,” he said. “We normally go on planes on a weekly basis, travelling around the region, having face-to-face meetings with people all over the GCC. And we would have to do that on a number of occasions before we actually get them to commit.”
The sales team at Battersea Power Station, one of London’s premier developments, have noticed a similar pattern. While phase one of the development is now complete with more than 1,500 people living there, phase two, which is 60 per cent sold, welcomes its first residents this month.
Despite lockdown restrictions, Battersea Power Station has recorded more than £150m in residential sales over the past 12 months, with 50 per cent sold to international buyers, said Meriam Lock-Necrews, head of the residential department at Battersea Power Station.
However, while there has been a massive increase in inquiries from Gulf buyers, partly thanks to the company’s latest marketing campaign in the region, the interest is not being matched by completed deals.
“With international travel being restricted over the last 12 months, we have seen a drop in the international market and those higher value apartments that people typically want to view before they commit,” Ms Lock-Necrews told The National.
She said buyers from the Middle East prefer viewing completed products and are willing to fly in when the development is completed soon.
“It is important we are on their radar and if travel restrictions ease, we want to be well positioned to capture that interest in the next quarter or two quarters,” said Ms Lock-Necrews.
“There are people who have invested in phase one but they like to buy several apartments to house the family within the same development, especially if they are coming to visit over the summer months.”
With the development’s dedicated Tube station opening this autumn, technology company Apple set to open its 46,451-square-metre office over six floors in the Power Station next year and retail units expected to be completed by the fourth quarter, Ms Lock-Necrews said it is an attractive investment option for Middle East buyers.
“Middle East buyers always want a return on their investment. Having the Tube station opening this autumn has solidified that and the retail is something that they are accustomed to as well,” she said.
“I have been to Dubai many times and they are used to living in developments that have retail [shops] and restaurants downstairs. In London, there has not been enough supply of that. When I first came to Battersea Power Station, it reminded me of parts of JBR [Jumeirah Beach Residence] where you get that community buzz.”
With prices for homes in the Power Station ranging from £865,000 for a studio to £1.8m for a two-bedroom unit, Ms Lock-Necrews said securing deals remotely has been a challenge.
“We have had preliminary conversations and they are certainly narrowed down to specific units, but they would like to visit first,” she said.
Mr Ennor-Glynn said Savills has had more success in selling cheaper properties, with buyers from Kuwait snapping up homes starting from £500,000.
“People seem more willing to commit at that level of the market,” he said.
Kuwait is the second-most active market for Savills, behind Saudi Arabia, which accounts for 60 per cent of the leads generated from the company’s recent marketing campaigns, while the UAE comes in third.
“For other countries across the region, it is fairly quiet – it is just a sign of the times,” said Mr Ennor-Glynn.
One luxury developer with a solution for the lack of international footfall in the UK capital is Paul Eden, founder of luxury property developer Regal London.
He is currently on a tour of the GCC to market the remaining 20 per cent of his latest luxurious development, One St John’s Wood, where prices start at £995,000.
He decided to resolve the problem of buyers unwilling to commit by recreating a 111-square-metre penthouse apartment at the company’s Downtown Dubai office.
“I flew everything out and fitted it out. It is not an exact example but the finishes are the same and it shows someone what they are getting. The buyers in this region say it is the first time it has ever been done,” said Mr Eden.
“You physically walk through a front door. You can touch your kitchen and physically walk into the bedroom and go into a bathroom – you can touch and feel everything.”
With the development set for completion in October next year, Mr Eden’s latest push involves penthouse apartments on the market for £7m to £8m, which he considers perfectly suited to Middle East clients because their larger size can house an extended family.
“We are building a six-star hotel that has the most incredible facilities: valet parking, a business lounge, club lounge, private dining room, cinema room, its own spa, treatment rooms, a 20-metre indoor swimming pool with Jacuzzi, his and hers hot tubs and sauna and steam room,” he said.
“From the penthouse levels, you can look directly into Lord’s Cricket Ground.”
Despite the travel restrictions, Mr Eden is confident he will sell the rest of his building because of the Middle East’s enduring love affair with the UK capital’s property market.
“The Middle East market loves London because it is secure and very safe for them to place their money. Everyone I have met over the past few weeks has missed London terribly and they are desperate to get back on a plane and come across,” he said.
Despite the hurdle of travel restrictions, Mr Ennor-Glynn said the outlook for the capital’s property market is extremely positive.
“Prices in prime central London remain 20 per cent below their peak in 2014 and 40 per cent below if you are a dollar-pegged investor,” he said.
Savills expects growth of 21.6 per cent over the next five years for prime central London property – with 3 per cent growth this year and 7 per cent next year.
This ties in with the wider market, which is booming thanks to an extended stamp duty holiday, with the average British house price reaching a record high of £258,204 in April – adding about £20,000 to the value of a home since the market was closed by Covid-19 a year ago.
“That is why people from this region realise it is a great time to buy for the medium to long term. It is probably the best buying time for the last 10 years in central London now. We are through a lot of the Brexit headwinds and we are hopefully coming out on the other side of the pandemic,” he said.
“London still remains fairly favourable in terms of cost of acquisition compared to other cities around the world and if flights open up, it could get very, very busy.”
Updated: May 17, 2021 01:09 PM