May 21, 2019

Investors from the Middle East are benefitting from a weak pound following Brexit

Middle East investors have increased their spending in UK commercial property, after taking advantage of the weak pound and rising oil prices.

Recently, many offices in the City of London financial district have fallen the most in value in seven years. This comes after the vote to leave the European Union and property funds were forced to freeze redemptions as investors urged to withdraw money.

Now, there is certainly a noticeable increase in Middle Eastern buyers in London, due to two key factors: currency and stability. The sterling’s weakness has given countries like the United Arab Emirates and Qatar a 15pc currency discount after the referendum, which is attracting a lot of new buyers to the UK.

Before the price of oil plummeted, buyers from the region had bought and developed some of the city’s most profound landmarks, such as the Canary Wharf financial district, the Shard skyscraper and the ever-growing popular Harrods department store.

Kuwait’s St Martins unit bought More London – a group of properties next to Tower Bridge – for approximately £1.7billion in 2013, which have been flourishing over recent years. Abu Dhabi Investment Corp is developing apartments too, in the Mayfair area.

According to Fidelity data, property values reached paramount in London in 2015 that led to a decrease in investment for six successive quarters. However now, investment is rising to 83pc year-on-year to £1.6billion in the fourth quarter.

The collapse of the pound has benefited Asia Pacific buyers. Many investors have a steady relationship with the UK and this has helped investment interest rise as well. They have a strong relationship with their education and legal systems making it an even more trustworthy safe-zone.

London real estate is doing a good job at luring in buyers after becoming more affordable compared to other big European markets. For example in Berlin and Paris.

Prime office yields are 3pc in Paris and 3.5pc in Berlin compared with 4.25pc in the City of London financial district, according to Knight Frank.

Assets are being picked up for a lot less than they were years ago. This is a huge paradigm shift for the UK property market as they have come a long way from their historical grounds.

Adding to this delightful success for Middle Eastern investors, the Donald Trump election has raised the prospect that London will grow in strength as the top destination for buying property.

UK capital was surpassed by New York for spending from the region in the 18 months through June 2016, demonstrating real concerns for America. Their interior focus and restrictions are toughening.

All in all, the real estate market in London looks like it has a bright future ahead of it due to more reasons than one, so investors have all the reason to be smiling this year.

Written by Gemma Smith

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