Cheap sterling cuts the price of luxury homes as wealthy overseas investors move in on the market's most exclusive addresses.
Gulf buyers grab bargains in London
LONDON // The traditional European exodus of the Gulf's superrich is being more anxiously awaited by London's luxury property brokers this summer than most. This month usually sees the first arrivals of the wealthy families of Abu Dhabi, Doha and Riyadh, who are escaping the sweltering heat at home. It also represents the start of the buying season for the penthouses and townhouses of Mayfair, Knightsbridge and Belgravia.
Now a weak pound is making such exclusive addresses even more desirable for investors from the region, while the rapid decline of property investment opportunities in the Gulf is stoking demand for more mature markets that offer the potential for steady capital appreciation. But it is not just Gulf investors who are being drawn to the London property market. Other overseas buyers are increasing their ownership of the city's prime addresses in a trend that is likely to accelerate on further weakening of the pound. Wealthy buyers from Gulf states are increasingly competing with rivals from Russia, China and other central and eastern Asian states.
"International buyers are exploiting the opportunity that cheap sterling offers across the capital. In the prime new development markets over £5 million (Dh26.8m), a staggering 100 per cent of our buyers during 2010 have been from overseas," said Ed Lewis, the head of the London development team at Savills, the UK estate agency. The agency's Sloane Street office is a short walk from Harrods, which was last month bought by Qatar Holding for US$1.5 billion (Dh5.5bn), the latest in a string of deals involving investors from the Gulf state.
The Savills office sells what are among the most expensive urban homes in the country: some of them even out of the price range of the A-list celebrities who frequent the trendy clubs and restaurants of the famous street. An eight-bedroom house known as "The Lodge" that is advertised here comes with a price tag of £37.5m and even has its own car lift. The extent to which foreigners are acquiring the city's most exclusive addresses is reflected in research from the firm. It estimates almost two thirds of the top end of the market - those properties worth more than £5m - that has changed hands over the past four years have been bought by overseas investors.
Foreign investment has helped high-end London properties perform particularly strongly over the past year while other segments have been much less consistent. Properties priced at more than £1m climbed for the seventh consecutive month last month and were worth 20 per cent more than a year ago. The response of the London property market to the global downturn in the sector over the past two years may also have encouraged some Gulf investors to park their money in the city instead of risking much more volatile markets closer to home.
Central London property prices are now 13.6 per cent higher than in the trough of the market in the first quarter of last year and are less than 10 per cent off the peak of the cycle reached in the autumn of 2007. "But in US dollar and euro terms they remained 33 per cent and 30 per cent below their peak, respectively," said Yolande Barnes, the head of Savills residential research. That looks especially attractive for Gulf property buyers who have seen prices tumble by as much as half in cities such as Dubai with little prospect of a short-term recovery.
"These are really capital-growth driven investment decisions and for a lot of people London is seen as a safe haven. If they can use the property themselves or their children and make some money out of it, that's what they're looking for," said James Thomas, the head of residential property at the central London office of Jones Lang LaSalle. Until recently, investors from continental Europe accounted for the largest single contingent of international buyers in the capital, but the sovereign debt crisis and the slide of the euro has had a major impact on this market, said Rob Bruce, a residential research analyst at Jones Lang LaSalle:
"There has a been a drift away because of the weak euro and Arab buyers from across the Middle East are filling the gap." firstname.lastname@example.org