UAE cities draw ultra-rich GCC real estate investors

dubai - 63% of GCC's wealthy keen to invest in global real estate in 2016

London, New York and Singapore are the destinations of choice outside of the Middle East for GCC's wealthy real estate investors while Dubai, Abu Dhabi and Sharjah remain as key regional investment hotspots, according to international real estate consultancy Cluttons.

The three UAE destinations are expected to continue attracting the region's wealth, reflecting the diversity of property investment offerings in the country and its perceived stability as a regional safe haven, a survey released by Cluttons said.

Cluttons' 2016 Middle East Private Capital Survey, carried out in partnership with YouGov, found that GCC-based high net worth individuals are set to continue investing in global real estate for the remainder of the year, with 63 per cent claiming that they are likely to invest in their most preferred real estate investment location during 2016.

Among the wealthy respondents, 54 per cent named residential as their preferred asset class while 60 per cent identified capital value growth as their main financial investment driver across all asset classes.

Steven Morgan, senior partner at Cluttons, said for the Gulf states as a whole, the oil price collapse that began in mid-2014 has certainly put government budgets under pressure. This has also triggered a series of macro policy amendments, aimed at tackling the projected budget shortfalls.

"However, from an investment perspective, sentiment remains positive among high net worth individuals who are targeting real estate in London, New York and Singapore in particular. These locations offer investors a variety of asset classes that command high capital value gains and high rental returns," said Morgan.

London most favoured
According to the report, London has emerged as the favourite global property investment destination amongst respondents, with 11 per cent naming the British capital as their most preferred city for investment. In the first quarter of 2016, Middle East investors pumped $418 million into London's commercial real estate, accounting for seven per cent of total investment during that period. This adds to the $5 billion invested by Middle East commercial investors in the city throughout 2015.

Faisal Durrani, head of research at Cluttons, said Canary Wharf, South Kensington and South Bank were named as the top preferred London investment hotspots by respondents.

"Of course, London's residential real estate has long been a global star performer, with close to 70 per cent residential capital value growth recorded in the past 10 years alone and we continue to witness an uptake in interest from Middle East investors. With Brexit, an instant currency discount of 12 to 13 per cent has opened up, which is attracting buyers from the Gulf, especially to markets such as Belgravia and Chelsea. Currency-based investment strategies are often overlooked, but they are increasingly significant, particularly in the current environment of sterling weakness.

"In fact, today, investors from India, Malaysia and the EU, for instance, could in theory exit the London residential market 61 per cent, 13 per cent and 17 per cent better off on their 2007 investments, respectively."

The report highlights that New York is the second-most preferred city for investment, with five per cent of respondents identifying the American city, which has historically been a popular destination for both institutional and private investors from the GCC. The Abu Dhabi Investment Authority and Qatar Investment Authority have both invested heavily in New York in recent years, underscoring the importance of the city as a key property investment hub in North America for outbound funds from the GCC.

Cluttons' report also shows that four per cent of respondents pointed to Singapore as their most preferred destination for investment, making it the most popular gateway in Asia.

"It's worth noting that Indian cities, such as Bengaluru, Mumbai and New Delhi, also appear among the top 10 property investment targets for GCC-based HNWIs, perhaps reflecting personal ties as well as a push for foreign direct investment from among the diaspora by the Indian government," said Durrani.

He said the research suggests that markets like Paris, Toronto, New Delhi and Berlin are all gaining popularity and are likely to be targeted by GCC high net worth individuals in the years ahead.

- issacjohn@khaleejtimes.com