Dubai: The Gulf’s high networth investors could be in the grip of a dilemma. Should they bide their time and hold back on any new exposures in Dubai until property values slide further through the year? (The rating agency S&P reckons that residential values at key locations in Dubai could dip by 10 per cent by year-end, and even touch 20 per cent at some of the emerging locations?)
Or are wealthy investors better off continuing to snap up realty assets in the UK (though London values are at their peak) or mainland Europe (where prices are coming along nicely and thus potentially ripe for an entry). Even cash-strapped Greece is a live possibility for cheque-toting buyers.
But London will still be the first port of call — “From CBRE sentiment survey, it is clear the majority of Gulf investors are seeking to increase their exposure to UK real estate over the next 10 years,” said Nick Maclean, regional Managing Director at the consultancy. ”One of the fastest growing collective investment markets in Europe are the provincial towns of the UK. Real estate has shown particularly strong growth following the re-election of the Conservative Party.” (The decisive victory also has put an end to sentiments that foreign buyers of UK property would have to cough up more as taxes. Even the Labour Party has decided to do away with the divisive Mansion Tax, which would have placed additional cess on owners of properties worth 2 million pounds and more.)
According to Andrew Jones, Head of Commercial at Battersea Power Station Development Co, “There is now complete clarity on the tax situation as the recent election returned a majority government which has ruled out the introduction of ‘mansion taxes’ as they were termed in the UK, and is passing a law to prevent rises in Income Tax, National Insurance or VAT.”
Jones’ company is redeveloping one of the easily identifiable landmarks of London into an upscale mixed-use development. It is currently in the process of selling the Phase 3 residences in conjunction with JLL. Designed by Gehry Partners and Foster + Partners, these are located on what will be the high-street between the new tube station and the Power Station building. (The retail component was launched last year. The Phase 1 residences went on the market in January 2013, and Phase 2 — with units located in the power station — did so in May last year.)
“We already have people from the UAE/Gulf who bought homes and have done so for a variety of reasons,” said Jones. “In some cases they have business interests in London, but others are drawn to the educational opportunities the UK can offer and for some they simply want a home in what is regarded as one of the best cities in the world for fashion, retail, culture and diversity.”
Away from trophy locations, Gulf’s investors will be thinking yields. Spain offers them opportunities, and more so “Because home price assets are yet to reach anywhere close to their highs,” said Robin Teh, Country Manager at Chestertons Mena. “That means investors here still have time to do their value picking in the expectation of future gains.
“Wealthy investors are being spoilt for choice between markets where real estate cycles have matured — Dubai’s one and even London — to those that are still some way off from getting there. The Gulf’s high net buyers are going to keep their assets spread out ... and they have every reason to do so.”
And they have the dollar’s power to make things go their way — “The strength of the dollar against the euro, in particular, clearly favours the wholly or predominantly linked currencies of the GCC,” said Maclean. “This has caused some regional institutions to divert funds that would otherwise have been invested in the US to the relatively cheaper markets of Europe.
“Our sentiment survey suggests that this strategy is partly due to a strong dollar and partly due to a perception that there is an increased geopolitical risk within the GCC.
“The exception appears to be the UK where investment flows have been rising consistently regardless of the relative performance of the pound against the dollar.”
