Continued political turmoil across the Middle East has caused local investors to almost double their investment in Western real estate, a new report by property consultant JLL has said. According to the report, 2013 saw more than $13 billion invested in Western overseas property, surpassing the previous peak JLL recorded in 2006.
In line with previous years, London remained the favourite Western destination for real estate investment, with Knightsbridge, Kensington, Mayfair and the City being the most popular locations. The historic links between the UK and the Gulf have “encouraged the flow of money” the March 2014 report said, with New York, Paris and Berlin also being popular cities respectively.
The wealth that is currently being invested in the Western real estate markets is coming directly from Sovereign Wealth Funds (SWFs) created through the exportation of hydrocarbons in the region. According to the report, despite the political instability in some areas, SWFs were getting “big and better” with “four of the largest SWFs’ being based in the GCC.”
According to the report, the Emirates based SWF, the Abu Dhabi Investment Authority (ADIA) could pass the $1 trillion mark in the next few years. This would mean that $100 billion would be invested in direct real estate if they maintain their 10 per cent allocation” JLL said.
The report also suggested that hotels based in the West had “a disproportionate appeal” with Middle Eastern investors. “Investment into the hospitality sector typically makes up between five to 10 per cent of a mixed portfolio, but for major Middle Eastern SWFs’ a quarter of all their activity has been in hotels,” JLL said.
According to the real estate experts, a new trend was also developing which saw groups and families increasingly join together to invest in overseas properties. JLL said many of these investors were doing so with the purpose of “wealth preservation” rather than collecting “a trophy portfolio.”