Which city attracts UAE's investment?
London is ahead of New York as the 'most preferred' city for investment in a survey
Dubai - London, New York top choices outside Mideast
London, which has been an historic investment magnet for Middle East high net worth individuals, has emerged alongside New York as the top investment location outside the Middle East for UAE HNWI in 2016.
"Despite global economic volatility over the past year, which contributed to multiple downward revisions for growth forecasts, investment appetite among UAE HNWI does not appear to be dented, with 61 per cent confirming that they would most likely invest in their top target city during 2016, according to leading international real estate consultancy, Cluttons.
"London (13 per cent) is just ahead of New York (10 per cent) as the 'most preferred' city for investment in our survey, however New York appears more frequently in investors' top three preferred cities for investment in 2016," said the report.
Indian cities, such as Bangalore, Ahmedabad and Mumbai, also appear as preferred investment locations for UAE HNWI, "perhaps reflecting personal ties as well as a push for FDI from among the Indian Diaspora by the Indian government."
The recent reciprocal historic state visits by the UAE and Indian leadership may have boosted the appeal of a 'home' investment amongst the UAE's non-resident Indian community, Cluttons said.
Outside the Middle East region, UAE HNWI surveyed in Cluttons' study are targeting 46 locations globally. In terms of asset class investment among the intended investment locations, 50 per cent are expecting to target residential property, 22 per cent favour the commercial sector and 28 per cent are expecting to target a mixture of both residential and commercial property investments. Of the commercial investments planned, responses from UAE HNWI indicate a stronger intention to focus primarily on retail and also on office investments. Industrial and hotel investments are less favoured outside the Middle East in 2016.
"London has long been a magnet for investors from the Gulf and while the Great Recession saw residential values across prime Central London plunge by an average of 20 per cent between the market peak of third quarter 2007 and first quarter 2009, they have rebounded sharply. Since then, average residential property prices have soared by 70 per cent," said the report.
While residential property remains the most attractive investment asset for UAE HNWI, interest in commercial property remains strong. Indeed, the continued high interest in UK commercial property from Middle Eastern investors was demonstrated in 2015 as they
secured over £3.8 billion in commercial property assets. The majority of this investment was London focused, with £3.2 billion purchased in the British capital alone.
The most popular commercial property sector amongst HNWI surveyed was retail. "This sector is also particularly popular amongst institutional level investors, as evidenced by the January 2016 purchase of shares in the Liverpool One shopping centre by the Abu Dhabi Investment Authority for £300 million. However, offices are also an investment asset of choice, with 22 per cent of UAE HNWI indicating a preference for this asset class," said Cluttons.
Around half (53 per cent) of the UAE HNWI respondents reported that locations within the Middle East were among their top three investment targets over the next 12 months. Of the target investment locations across the Middle East, over half have been identified purely for their residential investment potential, while over a quarter of the locations are set to be targeted for a mixture of residential and commercial investments. Commercial investments planned are reported as mainly being offices, followed by retail and hotels.
Dubai and Abu Dhabi are by far the most popular investment locations in the region amongst UAE HNWI investors. Dubai is both the leading target investment location as the 'most preferred' city as well as being the most commonly mentioned city in investors' top three preferred locations in the Middle East. Thirty per cent of UAE HNWI investors name Dubai in their top three most preferred cities, followed by Abu Dhabi at 23 per cent.
"It is clear that residential property is the dominant intended asset class among UAE HNWI investors, with 82 per cent of preferred investment locations intended to be mainly for residential acquisitions, or a mix of both residential and commercial property," Cluttons said.