London’s Residential Properties Continue To Woo Middle East Investors

Middle Eastern buyers are increasingly investing in Central London’s residential property market as they are encouraged by the city’s transparency and its credentials as a finance centre, according to a report by real estate consultancy JLL.

Although international investors control only nine of the largest 50 development sites in the city, these sites have the capacity to accommodate up to 28,000 new homes.

This figure already represents 20 per cent of the total planning pipeline in Central London and is expected to grow significantly over the next few years, JLL said.

“London’s position as a capital city and financial centre, alongside its stable political system and transparent legal framework, continues to attract interest from across the Middle East,” said Adam Challis, head of residential research at JLL.

“Whilst questions will often linger about the sustainability and depth of demand, the lack of supply is undoubtedly the most important factor for ensuring that the Central London development market will thrive over the next three to five years.

“Even if market conditions ease, as they will do at various times, it will remain important for developers to continue building and releasing product to feed this fundamental housing need.”

With international investment interest picking up, house prices have also risen significantly in Central London.

Property prices within the City of London or Square Mile rose 15.3 per cent over the last 12 months, JLL noted. Around 12,000 units were sold in 2013, up 63 per cent from 2012 while the number of housing units soared 97 per cent to reach 13,500 in 2013 from 6,800 units in 2012.

“Demand from buyers in the City of London has strengthened significantly, with strong support from the overseas market,” said Diana Alam, head of development sales & city residential office at JLL.

“Given that London’s financial district has 350,000 workers by day but only 8,000 residents, we are not surprised that there is high demand for housing in this area – particularly new developments.

“In the Square Mile, average price per square feet is approximately 15 -22 per cent higher than it was a year ago at £1,300 to £1,500, and prices are reaching highs of up to £3,000 per square feet.”

London’s property market has always been a favourite for investors from the Middle East.

According to a CBRE report released this year, Middle East buyers accounted for 17 per cent of total investments in the real estate sector last year, up from 7.5 per cent in 2012.

The UK capital recorded €32.2 billion (around $44.2 billion) worth of transactions in 2013, with the Middle East contributing roughly $7.5 billion.