Middle Eastern investors move on London property
Plummeting property prices, low interest rates and a weak currency has made London a prime target for Middle Eastern real estate investors as illiquid home markets look less attractive in the wake of the financial crisis.
In March, Landmark Property, a Dubai-based firm, opened an office in London’s Mayfair to capitalise on real estate it claimed was 25% more affordable through exchange rates alone.
Last month, M1 Real Estate, established in Lebanon, announced it had bought several properties around the exclusive area of Cadogan Gardens, citing the attractiveness of locking into investing in the city at a lower price.
David Swan, managing director at WW Advisors, which advises Middle Eastern investors on European property, said there was less free capital in the Middle East due to lower oil revenues, but several sovereign wealth funds had hired specialist property managers to cater for increased appetite for real estate outside home markets.
Swan said: “Purchase prices in London have fallen a long way very quickly, and now sit at up to 50% less than two or three years ago with rental levels down at a similar rate.
“Investors realise the major slumps have already happened and we are now back at realistic levels of rent over the long term.”
Ziad Dagher, M1 Real Estate’s business development and acquisition director, said London had long been an attractive place to invest, even looking beyond the current yield and foreign exchange opportunities.
He said in some areas of the Middle East, rental contracts were subject to tenant-only break clauses every three years, which meant property owners may have to find new tenants frequently.
In the UK this is not the case and longer-term arrangements made investments in the sector less risky. He added that volatility in the sector was not necessarily a bad thing because even if tenants moved out due to a business failing, this same volatile movement meant it did not take long for another company to fill the gap.
In London, sales of larger properties have become less frequent in recent months because of the substantial amounts of capital and potential leverage required.
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