Arabian Gulf property investors have begun bargain hunting among London’s most exclusive addresses as prices tumble.
House prices in some of the parts of London most popular with GCC investors have suffered their biggest annual falls in nearly seven years.
Average prices in the London district of Knightsbridge fell 7.3 per cent in the year to the end of last month, according to Knight Frank.
That is the biggest annual decline in almost seven years – prompted by Brexit uncertainty and tax hikes.
“We are seeing a lot of interest from GCC buyers looking to buy in prime central London this summer,” said Tom Bill, the head of London residential research at Knight Frank. “At the moment we are seeing that there is a currency play, which makes prime central London property a particularly attractive opportunity for them right now. Many are also asking for double-digit discounts on top of the currency discount,” he added.
Prices in Chelsea were down 7.2 per cent, South Kensington prices fell 5.7 per cent and Mayfair prices were down 0.8 per cent.
Knight Frank said that average house prices in prime central London fell by an average of 1.5 per cent in the year to the end of last month.
The decline in prices and rise in purchasing power has made many properties in areas such as Kensington, Knightsbridge and Westminster considerably cheaper for investors buying in dirhams or other Gulf currencies that are pegged to the dollar.
For example, a grade II listed seven bedroom townhouse in Eaton Square, currently marketed by Knight Frank’s Belgravia office for £55 million would have set a dollar buyer back around US$81.9 million if he bought it just before the EU referendum when the pound was trading at US$1.49.
However, at today’s exchange rate of US$1.31 it would only cost him US$72 million. And, if he took advantage of falling prices to demand a 10 per cent discount to the asking price, the purchase would only cost US$64.8 million – a saving of a fifth.
The fall in the value of the pound is also tempting Gulf investors into the UK hotels market.
Last week it emerged that 3 Associates, a Saudi family that runs a private wealth fund in Dubai and UK family office, bid US$1.3 billion for London’s Grosvenor House hotel plus shares in the Plaza and Dream Downtown hotels in New York.
The bid is now vying with another from Qatar Investment Authority, which was reported to be in discussions over a deal for Grosvenor House Hotel for an estimated US$337m earlier this month.
Both competing bids are understood to have been submitted following the UK’s vote to leave the European Union.
Brokers operating in the most prime parts of the city reported a rush of interest from overseas investors in the weeks following Britain’s shock referendum result on June 23, in which the value of the pound plummeted by 10 to 15 per cent against the US dollar.
Savills, Chestertons, Harrods Estates, Douglas & Gordon and Cluttons have all reported an increase in interest Middle East investors in the weeks following Brexit.
Knight Frank reported that prime central London rents fell 3.6 per cent in the year to the end of last month as some sellers opted to rent their homes out instead of selling them because of the increased uncertainty surrounding the EU referendum result.
“Landlords are taking an increasingly pragmatic approach to asking rents against the background of wider Brexit uncertainty and rising stock levels,” said Knight Frank’s Mr Bill.
lbarnard@thenational.ae
Follow The National's Business section on Twitter
