Middle Eastern buyers are returning to London's property market to buy homes, research released yesterday showed.
Buyers from the Middle East accounted for 16 per cent of prime central London house sales in the fourth quarter of last year versus 3 per cent in the first quarter of last year, according to a report by CBRE.
"The Middle East is increasingly becoming a source of strong and growing demand for London residential [property]," said Mark Collins, CBRE's head of residential. "There has been a steady flow of capital into the Middle Eastern financial centres and we anticipate that a significant proportion will end up in London residential.
"Undeniably, the low value of sterling is a key driver behind the strong demand. Over the last four years, the pound has fallen by 32.5 per cent against the Saudi riyal, for example, effectively discounting property prices by a third."
South East Asia is still the main source of demand for newly built homes in central London, CBRE said.
The average house price in central London is now £820,200 (Dh4.7 million), after a 2.3 per cent increase in the first quarter of this year, according to CBRE.
"Prolonged demand from overseas investors has maintained the upward pressure on house prices in central London, which are now 16 per cent above their 2007 peak," CBRE said.
Prices of prime central London residential property increased by 1.1 per cent in April on the previous month, according to the property agency Knight Frank.
"Prime central London property prices have been rising strongly for three years, on the back of foreign demand and London's status as a safe haven for investors," said Liam Bailey, the head of residential research for Knight Frank.
However, there are concerns that an increased stamp duty of 7 per cent on homes worth more than £2m for individuals and 15 per cent for property bought through a company could impair sales.
"Buyers at the top end of the market will clearly review their investment strategies, which could cause some stickiness, but the merits of the London market outweigh the tax disadvantage because it is a safe haven for stable long-term investments," said Mr Collins at CBRE.
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