Investors show interest in UK properties after Brexit
Brexit is now seen as delaying a housing market recovery by about six months
Investors in Dubai's property market have had a rough ride since prices peaked in 2014. Declining oil prices, a reduction in corporate hiring and expansion plans, stagnating salaries at non-oil private firms, and a persistently strong US dollar, have all weakened the appetite for purchasing Dubai real estate.
The latest knock to confidence is the 'overbuilding' carried out by developers across the Gulf region. According to AT Kearney, by December 2015, the GCC had $2 trillion worth of property projects in the pipeline. With property accounting for 70 per cent of the construction sector's workload for this year and next, the threat of oversupply can soften an already fragile market.
After two years of falling house prices, there was some expectation that Dubai's residential market would start to recover towards the middle of this year, or later. The UK's vote to leave the European Union however is now seen as delaying a housing market recovery by about six months.
This potentially creates a headache for locals and expats looking to invest their savings in Dubai bricks and mortar. And while the UK's recent decision to leave the EU came as a surprise to many investors, it has created opportunities for savvy real estate investors.
In the days following Brexit, the pound dropped to levels unseen since 1985, and many listed British companies suffered as share values dropped significantly. However, the FTSE 100 Index has since regained its losses, and pushed even higher, as the appointment of Theresa May as Prime Minister is welcomed by markets as a sign of stability.
But as the pound remains weak - and is likely to remain so in the short term - there are advantages for US dollar-pegged investors in the Middle East. For example, those who purchased a £350,000 property in the UK on 11 July would have saved £262,300 if they had made the same purchase on June 23.
Many investors are already taking advantage of this currency-linked opportunity. Prime real estate sales in London increased 38 per cent in the week after the referendum compared to the previous week, according to the property consultant Knight Frank. Despite the uncertainty and gloom about the possibly negative implications that Brexit posed have for UK property, month-on-month sales were actually up 29 per cent.
There has also been a huge spike in Chinese investor interest in UK property post-Brexit. Juwai, China's biggest international property portal, said the number of Chinese buyer inquiries into UK property in the month after Britain voted to leave the European Union was 40 per cent higher than average.
Coupled with this, the chronic under-supply of housing in Britain is only likely to worsen. The UK needs 250,000 homes a year to keep up with demand. Only 156,140 new homes were built in 2015, and this was the highest level since 2007. This pressure should impact rental yields and valuations positively.
While it may still be too early to call a recovery in UAE house prices, investors should look further afield for opportunities. For example, London over the last 20 years London property has offered consistent, steady returns, even during the global financial crisis.
IP Global clients who invested with us in London between 2009 and 2013 made a combined £116 million in capital appreciation by April 2016. Brexit aside, we remain of the view that the UK is still a tier-one property hotspot. And with a weakned pound, the opportunity for real estate investors is a golden one.
The writer is director and head of Middle East at IP Global. Views expressed are his own and do not reflect the newspaper's policy.
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