By David Godchaux
Subsequent to the financial crisis and the real estate slump in 2008 and 2009, residential and commercial property markets across the globe have been bouncing back over the last five years. Gulf investors have been using this opportunity to increase their exposure to overseas property markets.
Most of this overseas investment is being channelled in to European locations — in particular, London and Paris. According to data received from ‘Savills World Research’, the top property investment location for Arab investors is London with a whopping 35 per cent of all Arab institutional investments focused there over the last three years.
Other top locations are Paris (9 per cent), Manhattan (9 per cent), Milan (5 per cent), Sydney (5 per cent) and Washington (3 per cent). In the case of UAE investors, 52 per cent of their European institutional investment in the last five years has focused on the UK and 28 per cent on France.
In the case of Qatari investors, 46 per cent of their European institutional investment in the last five years has focused on the UK, 24 per cent on Italy and 19 per cent on France.
This trend is expected to continue in the near future. Over 91 per cent of Core Savills clients looking at acquiring properties abroad are targeting Europe, with over two-thirds of those strongly considering investing in the UK.
Arab investors are becoming more diverse in terms of the destinations that they are prepared to look at. Germany, other parts of the UK, as well as second-tier European locations such as Amsterdam, Frankfurt, Budapest and Madrid are also expected to be in demand.
One of the major reasons for the Eurozone attraction is its proximity to the Middle East, cultural diversity, favourable tax laws and stability. Wealthy Arabs from Egypt, Syria, Jordan and Palestine prefer to invest in Europe whenever they see the security situation deteriorating in their home countries.
Historical political and economic links between the Middle East and Europe also make it an easy choice. The UK in particular is more desirable due to its perceived tax-efficiency, transparency and historic familiarity.
In spite of the increased capital gains tax for foreigners and the punitive duties on unoccupied property, overseas investors have not been discouraged. Compared to other European countries like France and Spain, which have wealth taxes, the UK is still an attractive bet.
Even though the pound is currently weak, it is considered by most GCC investors to be more stable compared to the euro and is believed to have fared better in the wake of the Eurozone crisis.
Looking at the residential market in particular, the preference for London is very strong. It is considered a safe haven by most GCC investors due to its transparent property market, stable political and legal environment and liquidity.
These coupled with an enhanced lifestyle, quality infrastructure, and favourable time zone, ease of language and access make the city extremely attractive to Arab investors.
Indeed, the contribution of Middle Eastern investors to London’s super-prime (over £10 million or Dh55.93 million) market is very significant, at over 15 per cent, only behind Russian (19 per cent), and British (33 per cent) buyers.
According to Savills’ ‘UK Residential Dealbook’ (2007 to 2015), Mena investors’ motivations for purchasing residential property in the UK has primarily been to use the property as a main residence (46 per cent) and as a second home (38 per cent). Only in 3 per cent of the cases has the property been used as an investment.
