Opportunities abound in UK for Mideast investors
A London bus passes construction work continuing on buildings in the financial district in central London.
Dubai - Middle East investors are among the most attracted to what the city has to offer
Over the last decade, the UK has stood firm as one of the world's leading markets for residential real estate investment. A joint survey conducted in March by estate agency Cluttons and YouGov of 127 high net worth investors from Saudi Arabia, the UAE, Qatar, Bahrain, Oman and Kuwait revealed that London ranked the highest out of 196 worldwide locations to invest. So, what have been the key drivers of this increased interest in the UK?
The London property market remains one of the top global investment spots, and Middle East investors are among the most attracted to what the city has to offer. London has become the world's second-most expensive housing market, behind only Hong Kong and significantly ahead of third-placed New York. A square foot in London will now cost $1,025, compared to Hong Kong at $1,411, on average.
Middle Eastern investors see significant value in London and other UK cities, with the region committing record sums to UK commercial property in 2015. According to data from Real Capital Analytics analysed by Savills, Qatari, Emirati and Kuwaiti investors bought at least £5.9 billion of UK property in the first 11 months of 2015, compared with £4.8 billion for 2014.
IP Global has launched a special report on the UK property market which not only draws out the key investment trends we have seen over the last 10 years but also current and future buying behaviour and patterns. In general, we have seen prices being driven up by a strong and stable economy, an increasing population and a systemic housing supply shortfall. Regional cities such as Manchester, Birmingham and Liverpool are moving higher up the investment agenda, as are the suburban towns around London's commuter belt.
Suburbs get popular
Across London, continued population growth is placing extreme pressure on the city's housing supply, with rising numbers looking to commuter suburbs for value. Due to this, the outer London population continues to grow at a faster rate than that of inner London, driving significant price growth across the city's commuter belt. Many outer London boroughs, particularly those in the East and Southeast, are now expected to out-perform prime Central London.
This uplift is further enhanced in locations that will benefit from regeneration investment. As an example, areas such as Ilford and Woolwich, both on the Eastern end of the forthcoming Crossrail line, have seen significant regeneration spending in recent years that is playing a key role in powering local property market growth. From 2016 to 2020, property prices are expected to grow by 27 per cent in outer London.
Undervalued regional cities such as Manchester have had a wave of regeneration investment over the past 25 years, transforming them into desirable investment opportunities. Ties with the Middle East have always been in existence but have become much stronger following Abu Dhabi United Group's acquisition of Manchester City football club in 2008. Since then, the Abu Dhabi United Group and Shaikh Mansour bin Zayed Al Nahyan have spent more than £1 billion to regenerate the club and Football Academy, with over £200 million promised to 6,000 new homes in Manchester, the biggest residential investment for a generation. This ongoing evolution of the UK's second city is a key part of what makes Manchester so exciting, both for residents and investors.
Having witnessed the changes in the international investment property industry over the last 10 years, we can safely say that London, even through times of uncertainty, has remained top of our investor's wish lists. With good reason too, as from 2006 to 2016, the capital growth of London property has outperformed the UK average by more than double. Our clients invested £378 million into London from 2009 to 2013, and that group of investors have since seen over £114 million worth of capital appreciation - a pretty impressive return.
London will remain an investment stalwart for the foreseeable future but, as we've mentioned, it's a challenge to find investment potential in Prime Central London which is the key reason many of the projects we bring to market are in outer London or regional cities.
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.