London still 'hotspot' for GCC's wealthy investors, says Cluttons

Nearly half of regional investors aim to commit funds to a London property this year

More than a fifth of GCC investors said the UK is their preferred destination for real estate investment, according to a report by Cluttons. Reuters

More than a fifth of real estate investors from the GCC say the UK is their preferred destination for international investment, and almost half (49 per cent) aim to commit funds to a London property in 2018, according to a survey by Cluttons.

“The UK has historically been a beacon for Middle East investors, with the region’s strong political and trading ties with the UK underpinning health cross-border investment,” said the consultancy’s Private Capital Survey report, which surveyed investors in the first quarter of 2018.

London in particular is a “hotspot” for the region’s wealthy, who account for 15 to 20 per cent of all international residential property transactions in the UK capital, the report added.

Middle East investors, including sovereign wealth funds, are set to buy more overseas property this year as oil prices rebound from a three-year low, broker JLL said in a report in May.

Transaction volumes are expected to pick up this year following a 25 per cent decline of Middle East investment flows into global commercial real estate to $9.1 billion in 2017, JLL said.

A total of 22 per cent of 250 investors based in the GCC – including the UAE, Saudi Arabia, Kuwait, Bahrain, Oman and Qatar – chose the UK as their top investment destination in Cluttons' study. Of those, 38 per cent chose London as their preferred UK investment location, followed by Manchester at 25 per cent, Birmingham at 16 per cent, and Scotland at 13 per cent, the report said.

Within London, the upmarket borough of Chelsea attracted the highest proportion of GCC real estate investors to the capital (29 per cent), followed by Fulham (15 per cent). Hyde Park, Covent Garden and Soho, and Clerkenwell were also among the top five London neighbourhoods for property investors from the region.

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The primary reasons for the high appeal of London were its “high quality infrastructure, cosmopolitan lifestyle and good return on investment despite the current political-economic situation,” the report said.

“Despite Brexit, London’s position as an investment magnet appears to be unchallenged,” said Faisal Durrani, head of research at Cluttons. “The city is perhaps more ‘Brexit-proof’ than we give it credit for.”

The majority of Arabian Gulf investors said they preferred new-build and freshly completed properties over second-hand or older properties, particularly for residential assets (71 per cent versus 9 per cent), according to the report.

This was not the case for a separate survey of London-based property investors conducted by Cluttons as part of its report. Almost two-thirds (60 per cent ) of 50 London investors said they preferred secondary or period stock over new build, demonstrating marked differences in investment tastes.

Of the Middle East survey respondents, 45 per cent said they had between $500,000 (Dh1.82 million) and $750,000 of assets excluding their main residence, 31 per cent said they had $750,000 to $1m, and 24 per cent had more than $1m in assets. Almost half (43 per cent) already held property assets in London, while 58 per cent said they held assets elsewhere in the UK.