Ben Stroud, Associate Director of Residential Agency, Development & Investment at Jones Lang LaSalle London
The Central London residential market is becoming increasingly attractive to Middle East investors according to the latest Central London Residential Market report published by Jones Lang LaSalle, the world's leading real estate investment and advisory firm. In 2011 the firm sold London new build residential property to foreign buyers valued at circa US$ 2 billion of which regional investors accounted for about 9%, up from 5% in 2010. The Middle East now accounts for the second largest group of foreign investors into the London residential market after nationals from the Asia Pacific region who accounted for 15% of overall sales.
Despite the on-going global financial crisis and continued concerns over the Euro, Central London’s residential market continued to recover very strongly throughout 2011. Over the past two years core locations throughout the UK capital have seen prices increase by an average of 10% while outer core areas have seen growth of 6.9% fuelled by a chronic undersupply of property in the best London addresses encouraging steady demand from both domestic and international buyers. This growth is expected to continue throughout 2012. Jones Lang LaSalle estimates that Central London prices could grow by 4% this year, 5% in 2013 and peak at 8% in 2014. Rents are also expected to grow by 7% over the next twelve months and 8% in 2013, providing a solid return for potential investors.
Demand is being driven by the lack of new supply which is being increasingly exacerbated by a population which is expected to grow by about 8.6% over the next decade. However, whilst two bedroom units are seeing the highest price growth, driven by the corresponding increase of 11.2% in the number of households, the majority of Middle Eastern investors are primarily looking for large family homes with 3 to 4 bedrooms, ranging in value from US$3 to US$24 million. Key areas of interest remain Lancaster Gate, Marble Arch, Knightsbridge, Belgravia, Mayfair, Kensington, Regent’s Park and St John’s Wood. However Jones Lang LaSalle has identified a new type of Middle Eastern investor – those who are looking for value with investment opportunities in properties outside these traditional areas such as those in Marylebone and Fitzrovia.
Commenting on the report, Ben Stroud, Associate Director of Residential Agency, Development & Investment at Jones Lang LaSalle London said: “Middle Eastern investors have strong historic links to the London property market and have typically invested for the longer term. We are definitely seeing increased interest both in terms of volume as well as the variety of locations that regional investors are interested in. London continues to offer solid growth potential and its twinned status as an accessible capital city and financial centre, alongside a stable political system and transparent legal framework, continues to attract interest from across the Middle East. London’s reputation as a safe haven for investors is being reinforced by global troubles not undermined. Additional incentives such as a weak Sterling and a favourable tax system are also making it more attractive amongst a range of potential foreign investors.”