LONDON // When it comes to dinner party conversations, there are always two topics that never fail to arouse Londoners. The weather and the price of property. In the middle of one of the coldest Februaries in memory, the snow and ice have vied with the collapse of the housing market to induce a national sense of winter gloom.
Thousands of miles away from the capital's icy streets, however, the first green shoots of recovery may be emerging in the Gulf sunshine. A report on London's prime property market from the estate agent Knight Frank shows that the overseas demand has risen 35 per cent year on year. Leading the way are Middle East buyers who make up 52 per cent of that rise. The lure is a collapsing pound on the international currency market - down to around Dh5.3 from more than Dh7 last year - and a 22 per cent fall in property prices since they hit their peak. Robert Barlett, the chief executive of the British estate agent Chesterton Humberts, arrived in Abu Dhabi earlier this month on a visit to his newly opened offices near Salam Street - at present the only British agent in the Emirates.
"We looked around the area for two years before we settled on Abu Dhabi," he said. "Much of the UAE has had a difficult time since the credit crunch, but Abu Dhabi is still incredibly wealthy and we saw a demand here for properties in London." Most Middle East buyers are heading - as they always have - for Knightsbridge's Pashmina Triangle of Harvey Nichols department store, Harrods and the Jumeirah Lowndes Hotel. Some venture into Mayfair and Belgravia while others check out properties in the £1 million to £2.5 million (Dh5.3 million to 13.3 million) price range in Chelsea, Kensington, Notting Hill and Holland Park - the areas hardest hit by City redundancies - where viewings are up by more than 80 per cent.
It is a small but exclusive corner of the British market - almost a colony - where solid 19th century terraced houses used to sell for more than £20m without raising an eyebrow. Indeed, in the much hyped One Hyde Park, opposite Harvey Nichols, a luxury block being developed by a consortium led by Qatari Diar Real Estate, four penthouses were priced last year at £84m each. The cheapest unit is now listed at £4m. One quarter of the buyers were said to be from the Middle East.
All this helps to explain why Mr Bartlett is looking eastward. "This is the time to buy,'' he said. "Some of the polls say the market has dropped by 16 per cent to 18 per cent, but looking at actual transactions it is much more like 25, even 35 per cent, down. Then add the value of the dollar against the pound and London is seeing a massive drop in prices." Many of his clients buy an apartment or a house to use for a month or two in the summer. Others buy for long-term investments to exploit what is a strong rental market.
"Our Arab clients are very investment driven," he said. "They make decisions quickly, not just because they have the money but because they trust dealing with a British company. "It is quality they are after. It might be as small as a £400,000 apartment or a £4m house but it has to be smart and well decorated with a high spec. The Arabs are a very proud people and appearance is important to them. They won't tolerate bad workmanship."
Chesterton has had interest in an airy three-bedroom penthouse with a studio-style living area for £5.75m and a one-bedroom studio next to Harrods at £1.75m. A five-bedroom terrace overlooking Lowndes Square is on the market for £11.5m. But as Louise Hewlett, of Aylesford estate agents in Chelsea, emphasises: "Prices depend on what people are prepared to pay. It is no use looking at what was sold last year; it's what's happening today that counts."
There is no doubt that a cash-in-hand buyer holds all the trumps. Charles McDowell, an independent property consultant, is careful to moderate the publicity that has followed the takeover of Manchester City by Sheikh Mansour bin Zayed, the Minister of Presidental Affairs, which has led the fan in the street to think all Emiratis have unlimited cash. "The Middle East has some of the same economic problems that we have in the UK," he says. "They are careful to buy at the right price and I have noticed that they are going for slightly smaller units. I was looking at a place which was £7.5m 18 months ago; now it could go for £4.5m to £5m.
"I have shown clients a two-bedroom apartment in Cadogan Place in need of some work for £1.2m and another in Pont Street, behind Harrods, where a 2,100-square-foot apartment is going for £5.5m. "I have found that Arabs buy but don't sell. They don't flip properties the way people buy and sell off-plan in, say, Dubai in the hope of a quick profit. They keep them and build up a portfolio in a very solid, old fashioned way. They buy quality."
In fact, Mr McDowell knows of one investor from the Middle East who owns 150 properties in central London which are rented out. Ed Mead, of Douglas & Gordon, has found that 70 per cent of his transactions are with foreign buyers. "Arabs like to buy top-end properties," he says. "But they don't go in for trophy homes. They don't want to show off like the Russians, Indians or Chinese, who are the first generation rich. The Arab buyers are now third generation. They went through that in the seventies and learnt from their parents. They have no need to flash their cash."
Tom Dogger of the agency Winkworth reckons there is another contribution to the renewed interest in Britain. "The UK seems a more secure market, especially as these are not the sort of buyers worried about mortgages. These are cash buyers." * The National