LONDON // Summer in Europe, particularly in London, has long been attractive to Emiratis with means.
But this summer, there is an added incentive to encourage Emiratis to travel to the continent and to consider investing more of their money into certain of the trading bloc’s hottest property markets.
Last month, visa restrictions were lifted on Emiratis travelling to the European countries that make up the Schengen area. Visitors now receive a visa on arrival, which allows them to stay for 90 days in any 180-day period.
This means Europe now has reciprocal visa arrangements with the UAE, something that has been in negotiation between governments for many years.
The United Kingdom, which is outside the Schengen area, has also relaxed its visa restrictions for Emiratis. Since the beginning of 2014, the UK has operated an electronic visa waiver system for Emiratis.
Almost 50,000 Emiratis used the service last year, which simply requires them to register online up to 48 hours before departure to the UK. They can then stay in the British Isles for up to six months.
Faisal Durrani, an international research manager at Cluttons, a British estate agent, believes the relaxation of visa restrictions will lead to a boom in cross-border property investment.
“There is no doubt that visa free travel to the Schengen area for Emiratis has unlocked the door for a significant potential upturn in cross border property investment. The added benefit of the weakness of the euro means that dirham buyers are now about 23 per cent richer than this time last year, in euro terms. This clearly makes an EU-based property investment particularly attractive.”
“Of course it’s not just Emirati buyers that are in this position. With most GCC states maintaining a fixed peg to the US dollar, they are all well positioned to leverage this tremendous currency advantage that does not look set to weaken in the short term, especially as the Greek financial saga lingers.”
Other factors are also encouraging, not least that there are about 500 flights a week from the UAE to Europe. And if Europe is suddenly more attractive to Arabian Gulf investors, that can only help to increase the known attractions of London – which is Europe’s safest and most liquid property market, according to IPD, a property analyst.
While it is almost impossible to track residential investments from GCC investors because most are private deals, it is clear from the patterns seen in the commercial property sector that the UK continues to have a strong appeal for Emirati investors.
Mr Durrani says there is an upturn in dollar-based funds looking at commercial assets in the UK. From January to March this year there was a 150 per cent increase in foreign purchases of office buildings, shopping centres and the like. About 40 per cent of that money is believed to come from Middle East buyers.
London remains the prime destination for Middle East money coming into the region.
Such investors are not really interested in receiving income from properties they buy and are investing primarily for capital growth.
Frequently they “buy to leave” – in other words buy a property that they live in for three to four months a year and then leave empty at other times.
In Chelsea, Belgravia and Knightsbridge – three of London’s most expensive areas – Mr Durrani says there are a lot of value driven investors coming into the market. They are buying property they can improve and add value to.
Raed Hanna, the managing director of Mutual Finance, believes that the relaxation of the rules on visas will be welcomed by Middle East investors.
“A large number of Middle East families and companies are looking to diversify their investments, due to present situation and uncertainty in [parts of] the Middle East,” says Mr Hanna. “The UK is considered a safe haven, even though the returns are lower than in their home countries.
“Any changes that make it more efficient for people to come here and invest are welcome, families want to be on the ground and feel exposed when dealing with matters at arm’s length or via intermediaries,” adds Mr Hanna, who has been assisting Middle East investors with the procurement of suitable properties throughout the UK for 35 years.
Inward investment from the Middle East into the UK is now five times what it was in 2013, says Mr Hanna, who expects it to continue growing for the foreseeable future.
Besides visa relaxations, the relative weakness of sterling and the euro, the other major factor pushing more Middle East investors into UK property markets is the Conservative victory in last month’s general election. Investors rushed into the market in the wake of the election as the threat of the so-called “mansion tax”, rental caps and the scrapping of “non-dom” status receded.
Chris Brett, the head of international capital markets at CBRE, agrees there has been a surge in interest from GCC investors in London property, which has only increased since the decisive general election result.
Private investors, in particular, he says, have been keen to explore investment angles. The UK’s developing private rented sector is also appealing to Middle East investors.
Last month, the Bahrain-based Apache Capital Partners said it was funding a £1 billion (Dh5.83bn) development in Manchester that will provide 458 new homes initially, for let to private tenants.
Silver Arrow, the Abu Dhabi Investment Authority fund, last year backed Fizzy Living, another British developer, with £200 million of capital. The investment allowed Fizzy to make its first purchase for a build-to-rent scheme in Finchley, north London.
CBRE research forecasts that Middle East investors will spend US$180bn in commercial real estate markets outside their own region over the next decade.
Europe is the preferred target with 80 per cent of the $180bn, about $145bn, targeted for the region over the next 10 years. Close to $85bn will flow into the UK, with $60bn directed at continental Europe, CBRE says. France, Germany, Italy and Spain are among the key target markets on the mainland.
Beyond residential investment and commercial property deals, the relaxation of visa restrictions will also be a boost to London’s most prestigious shopping streets. Retailers and restaurateurs in the heart of the city have been campaigning hard for visa relaxations for high-spending tourists. The likes of Selfridges on Oxford Street, one of the capital’s most stylish shops and always popular with visitors, expects to see an increase in shoppers from the region. The world-famous Harrods store, which was acquired by Qatar Holding from Mohamed Al Fayed five years ago for £1.5bn, and its Knightsbridge neighbour Harvey Nichols, are also confident of more high-spending visitors passing through.
According to UK government figures, Middle East visitors spenta total £4.5 million a day when visiting London in 2013. In total, £1.25bn was spent in the UK by families from the Middle East, with half that figure spent in London.
Retailers will be hoping that they can capture even more than that in summer 2015.
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