London luring homebuyers from Middle East

London agents report a surge in Middle East buyers in the wake of the turmoil in the region.

Buyers from Bahrain, Iraq, Oman, Lebanon and Saudi Arabia led the surge in London. Reuters

The number of Middle East homebuyers in London has doubled in recent months as investors seek a haven, agents report.

"The Arab Spring has had a direct and meaningful impact on the central London residential market," said Liam Bailey, the head of residential research for the consultancy Knight Frank.

Buyers from Bahrain, Iraq, Oman, Lebanon and Saudi Arabia led the surge, Mr Bailey said. The volume of buyers from the region increased by 100 per cent from January to May compared with the same period last year, he said.

Other London agents report similar increases in Middle East activity.

"There was a big upshoot in January when things kicked off in Egypt," said Martin Bikhit, the managing director of Kay and Co, another property agency. "Then it has gradually increased over time."

The number of Middle Easterners seeking property in the high-end neighbourhoods of Marylebone, Regent's Park, Hyde Park and Bayswater doubled in the first quarter of this year compared with the same period last year, according to Kay & Co. Middle East purchasers accounted for 30 per cent of the firm's inquiries, Mr Bikhit said.

While their interest can also be attributed to high oil prices and a favourable exchange rate, political unrest is the largest driving force, he said.

"People are jittery about what is happening," Mr Bikhit said. "People are taking a worst-case scenario."

Middle Easterners accounted for 10 per cent of sales in prime central London during the first quarter of the year, up from 7 per cent in the same period last year, said Yolande Barnes, the director of residential research for Savills.

Middle East buyers paid an average of £5.4 million (Dh32.6m) for houses in the most sought-after neighbourhoods, compared with £3.3m paid by UK buyers. Russians and Eastern Europeans are still the biggest spenders, paying more than £8m, according to Savills research.

The number of Middle East investors in London property surged in 2008 and 2009 at the height of the global downturn, then fell off last year, Ms Barnes said.

The current buyers are savvy investors who know London's neighbourhoods, she said.

"I don't think it is as reactionary a market as some people suspect," Ms Barnes said. "These are people who are global players."

She said the majority of Middle Easterners were buying homes for their own use, not as investments to resell.

Some were simply moving up to bigger homes, Mr Bikhit said. They have been looking for secure properties in good neighbourhoods or buildings with 24-hour security, "both of which are in short supply", he added.

Mr Bikhit expects this month and next month, traditionally the busiest period for Middle Eastern buyers, will be the biggest sales months of the year in central London. And that is likely to continue to drive up prices, which have risen steadily since 2009.

They are up 33 per cent since March 2009, according to Knight Frank data. That includes an 8.3 per cent increase in the past year, thanks largely to foreign interest.

Asian buyers accounted for 60 per cent of sales of new properties in London in the six months to the end of April, Knight Frank reported.

The strongest activity has been in the high end of the market. The average price of central London sales handled by Savills rose from £3m last year to about £5m in the first quarter this year.