With pent-up demand following the pandemic, and the declining value of the pound, the London property market is seeing increased interest from rich Gulf buyers.
The value of the pound has been on a steady downward slope throughout 2022, recently sinking to its lowest level against the dollar since March 2020. Subsequently, the UK has attracted the attention of investors from around the world, particularly high net worth individuals from the Middle East, with London naturally emerging as a favoured destination for investment.
Pent-up demand drives up Gulf investments
Wealthy Gulf buyers have long been keen to acquire one of the Capital’s golden postcodes. Pre-covid, as many as one in six homes bought in prime central London were purchased by buyers from the Middle East. Due to travel restructions throughout the pandemic, it wasn’t uncommon for rich Gulf buyers to invest in property they were unable to view, or could only view online—determined to acquire a stake in the London property market. Following this, experts predicted that the easing of restrictions would see a surge in investment activity. And that’s exactly what we’re seeing.
The last couple of years have produced pent up demand which, today, is manifesting in an influx of rich Middle Eastern buyers across Prime Central London. They join a mass of both domestic and international buyers wanting to get their hands on prime London property, with the number of new prospective buyers reaching its highest point in a decade in May of this year.
Bolstering economies across the Middle East
Economic success in the Middle East, largely due to rising oil prices and a strengthened US dollar, is also enabling this surge in activity from rich Gulf buyers. Saudi Arabia’s plans to diversify the economy so that it’s not as oil-dependent also led to a rise in value of the Saudi Riyal. Noticing Saudi’s success, other Gulf countries are also making this bold move in an attempt to boost their economies.
High-net-worth individuals aren’t the only ones contributing to London’s growing property market. Since 2006, the market has also received substantial investment from Middle Eastern governments, which have invested a combined £4.4 billion in development sites and high-value buildings across the city. Today, they own 9 of central London’s largest development sites, equating to almost 30,000 new homes.
What else is driving Gulf buyers to pursue property in London?
Temperatures in the Arabian Gulf soar during the summer, leading to an exodus of the Middle Eastern super rich to Europe.
London, in particular, is a home from home for many wealthy Middle Easterners. Rich in heritage and diverse in culture, with iconic landmarks and beautiful boroughs, it is easy to see what draws people to London from across the globe. Its education systems are world-renowned, and many Middle Easterners make the move to provide their children with a high-quality English education, in a city abounding with opportunities.
In addition to the decline in value of the pound, UK mortgage lending is very accessible to Middle Eastern residents, making London property a very attractive financial investment.
Mike Sefton, Senior Property Consultant at Benoit Properties International
“Interest rates in the UK have recently risen in-line with other international markets. However, the investment case for UK real estate still remains a top choice for Middle Eastern buyers due to the reliable growth in the Capital and current weakness in GBP. UK finance for Middle Eastern buyers is still very accessible, with Islamic financing also available.”
Knight Frank forecasts that prices in Prime Central London will outperform most other UK markets over the next five years; Gulf buyers will be a key driver behind its growth. As the pound continues to plummet, we expect to see a continued emergence of Middle Eastern and international buyers onto the London property scene.
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