MIPIM 2016: Private Middle Eastern investors are starting to look beyond prime central London for better value, experts revealed at MIPIM.
Evidence shows that over the past 12 months they have been investing in property – where they account for 20% of total buyers – outside their favoured zone 1 and 2 locations and up to 10 miles outside of the city centre for both second homes and investments.
Joanna Leverett, head of international residential markets at Cluttons, said: “It is very much price driven. They would prefer to be in central London, but prices are so high that naturally they are looking further afield. They want a two-bedroom flat for £2m, which they are not going to get, so they’re willing to get on the tube to look at potential investments. They like to buy off-plan and they like new-builds because that’s what they are used to in their local market.”
Leverett was speaking at a panel session which revealed the results of Cluttons’ Middle East Private Capital Survey 2016. The survey of 127 high net worth individuals showed that London was their preferred location to invest over the next 12 months, followed by New York and Bangalore.
The survey also found that 54% would invest in residential, 22% in commercial and 23% in both.
Steve Morgan, chief executive of Cluttons in the Middle East, said the most surprising result was the number of Indian cities being targeted and that Sydney factored high on investor lists, despite the distance between the two.
Morgan said the impact of the oil price plummet would play out in London over the next year. “There are two elements with Middle Eastern money coming into London: sovereign wealth fund money, which may need to be repatriated to plug fiscal deficits locally, and private family money looking for somewhere to go, and that’s where London is going to see the influx of investment going forward.”
Tony Danaher, chief executive of UKTI’s Regeneration Investment Organisation, said 10% of investment in the UK came from the Middle East last year and he was confident that the prospect of Brexit was not affecting appetite.
The opposite is true, said Morgan. The investors saw the EU negotiations as encouraging.
Danaher said: “The missions that we have done in the Gulf with Cabinet indicated that appetite is not waning at all. We’ve always had the sovereign wealth interest but it’s interesting to see how much private wealth is coming through as well. Plus, interest beyond London is now starting, in Manchester and Birmingham in particular.”
He added: “The Middle East is a region that gets special treatment from the government, and there will be no deviation from this priority status.”
Cluttons’ survey found that drivers of Middle Eastern money to the UK were the security of capital London could provide, uncertainty in the investors’ domestic market, and the cool weather.
Steve Kennard, director of regeneration at Hadley Property Group, said: “London is now open for business. Since the millennium, we’ve handled large projects significantly and the GLA has achieved enormous amounts in terms of placing London strategically among the big players. This has to be important when you’re an international investor looking here.”
But Kennard added that while London is successfully opening its doors to overseas investors, there is still work to do in making the real estate landscape accessible to them.
The panel:
- Joanna Leverett, head of international residential markets, Cluttons
- Steve Morgan, Middle East chief executive, Cluttons
- Tony Damaher, chief executive, UKTI regeneration investment organisation
- Steve Kennard, director of regeneration, Hadley Property Group
- Chaired by Emily Wright, features and global editor, Estates Gazette
In partnership with:
- Cluttons
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