London’s suburban real estate moves Middle East investors

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• UHNWs still sold on central London
• Cash buyers flock to outskirts
• 50% rise in GCC investors

While central London property retains its allure for ultra-high-net-worth individuals from the Gulf Cooperation Council (GCC) countries, cash buyers are flocking to the outskirts of the UK capital to snap up investment properties.

A survey of GCC high-net-worth individuals by London-based shariah-compliant lender Al Rayan Bank found that a third of respondents said they had invested in London property over the last 12 months, more than any other major global market.

The survey looked at 151 investors from Saudi Arabia, Qatar and the UAE with an average net worth of $208 million.

“UK property is the darling of GCC investor portfolios. London, in particular, is seen as a reliable location for safe returns,” said Maisam Fazal, chief commercial officer at Al Rayan Bank.

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The percentage of Middle East buyers of prime property in London’s most prestigious postcodes hit a four-year high of 10.9 percent in the second half of 2022.

But while the interest in Mayfair, Park Lane, Belgravia et al remains strong, developments around the periphery of the city are also appealing to investment buyers.

Ian Plumley, managing director of Barratt London Mena, which is led by UAE-based Hardington Residential, said they have witnessed almost a 50 percent increase in GCC investors at its latest development, Sterling Place, in New Malden, in the south-west of London, since the start of the year.

“We’re seeing more cash buyers come out,” he said, revealing that a quarter of those purchasing properties from this region are doing so without borrowing.

Barratt is currently delivering about 1,700 properties per year with a target to ramp that up to 2,000 in the medium-to-long-term.

A potent mix of high interest rates, increasing inflation, the ongoing cost-of-living crisis and the conclusion of the UK government’s Help to Buy scheme, which was designed to assist people in getting on the property ladder, have all accelerated rental rates in the capital.

Since 2022 London rents have increased by 6.2 percent through to September 2023, according to figures from the Office of National Statistics (ONS), the highest rate since the data series for the capital began in January 2006.

Private rental prices in London account for almost a third of UK rental expenditure.

“Those who are debt-reliant are wary of investing in today’s market, however, this has in turn led to an opportunity for equity-backed investors to take advantage of reduced market competition in addition to stronger and more enticing rental income for the investing seeking client,” said William Langton, associate director, international residential sales at Savills Middle East.

Middle Eastern investors are expected to plough $3.2 billion into the UK real estate market in 2024 to capitalise on its increasing affordability and a growing interest in the student accommodation sector, according to London-based Bank of London and The Middle East (BLME).

“Middle East clients still like living in London, but if they have the cash then they are seeing opportunities outside of the city, for maybe commercial needs or for larger buy-to-let portfolios,” said Andy Thomson, head of real estate finance and private banking at BLME.