Arab investors account for a total of 15% of the Central London residential market; the majority of these Arab investors are from the GCC. London is an open, accessible and well established international real estate investment market that is transparent and well regulated. As such, it has been a traditional investment base for Arabs for many years, according to Jones Lang LaSalle report.
On average Central London price growth across core and outer core locations rose by 3.5% in 2012. Core locations experienced an average 4.1% rise while Outer Core areas witnessed a 2.9% increase. We continue to predict average price rises of 2% in 2013 accelerating towards 8%pa by 2016.
“There are a range of different factors that make London attractive to Gulf investors. London combines the benefits of a political safe haven and a global financial centre which is reflected in the stable political and economic structure. Other attractions for Arab investors include the pound’s relative weakness against the Euro, time zone/relative ease of travel to the GCC and tax efficiency. There is no doubt that interest in the London residential market remains strong among Arab investors and they form an important source of demand for the many projects that Jones Lang LaSalle is currently marketing in Central London. This has of course been the key driver in our decision to establish this new business line within our MENA business,” Looking at demand from the local Middle Eastern market, Wahi Mohsen, Head of UK Residential Sales at Jones Lang LaSalle, said.
“The market continues to be dominated by volume developers with balance sheets that enable a broader range of financial solutions. Niche developers reliant on project based finance are experiencing an improving environment but continue to find the availability of finance tough going,” Andrew Frost, Lead residential director at Jones Lang LaSalle, said.
The River submarket has the highest levels of construction with over 3,000 units coming out of the ground, but this is also the market where demand is greatest. The East has the second highest volume of development and the City is the third active.
“The outlook for the Central London residential market over the next five years will be determined by three key factors – overseas demand, domestic demand and available supply. Importantly, the outlook for all three looks to be supportive of further upward price growth and market activity,” Neil Chegwidden, residential research director at Jones Lang LaSalle, said.
“Prospects have also improved in recent months as concerns surrounding the tax position of some overseas buyers following the 2012 Budget consultation proved less imposing than originally thought. These factors together with the weakening of sterling, London’s safe-haven status and the UK’s continued political stability mean London is likely to see significant inward capital flows over the next few years. On supply, we expect new development activity to continue to increase over the next five years, but very importantly we do not forecast that this will be sufficient to meet the growing demands of London’s expanding population. So, as demand grows and supply shortages are exacerbated we believe price growth will be pushed towards 8% pa by 2017.”