With promising returns and long-term prosperity prospects, London’s real estate market is drawing investors from the region, writes Ian Plumley, Managing Director of UAE-based Hardington Residential, lead agency of Barratt London MENA office
As we navigate the economic currents of 2024, London's real estate market continues to remain an attractive investment destination for Middle Eastern investors. With promising returns and long-term prosperity prospects, the UK's economic growth and stability continue to draw investors from UAE, Saudi Arabia, Kuwait, Qatar, and other Middle Eastern nations to London.
London's real estate market offers a unique blend of factors that make it a highly sought-after investment option. The recent strides in the UK economy, highlighted by favourable interest rates and sustainable growth trajectory, have set a compelling stage for investors seeking long-term returns, bolstering investor confidence and laying the groundwork for sustained prosperity.
The UK government's Autumn Statement revealed significant progress made by the country over the past year, with the inflation rate falling to a two-year low of 4.6% in October 2023, with the Office for Budget Responsibility predicting a further fall to 2.8% by the end of 2024. This positive news has ensured that Britain's finances continue to be rated as AA by Standard & Poor. At the same time, Moody's has removed a previous credit risk and settled on an Aa3 rating, reaffirming its confidence in the UK market as a high-quality and low-risk investment option.
Despite occasional economic fluctuations, investing in real estate in London has always been a reliable long-term investment option, with an average annual compounded growth rate of 9% over the past 30 years. In the past nine years, the average London home has seen an increase in value of 45%, with growth being even more pronounced in regeneration areas. According to CBRE, these areas are predicted to see additional growth of up to 5.8% compared to nearby areas lacking the same investment.
London's real estate market not only presents an attractive investment opportunity for those seeking to purchase a property but also offers significant potential for investors seeking to rent out their investment properties. Selecting homes in the most promising emerging areas of the capital can provide several advantages, with rental properties in London experiencing growing demand and potential annual yields reaching up to 6.5%.
The UK government's prudent fiscal policies and the reassuring stability of the UK economy underpin the attractiveness of London's real estate market. In addition to providing a sound investment environment, London boasts a track record of robust capital appreciation and steady rental income, making it an ideal choice for investors seeking security and growth.
Barratt London's Bermondsey Heights development is a prime example of the immense potential for investors seeking robust returns. Located in the vibrant borough of Bermondsey, in London’s Zone 2, the development witnessed double-digit house price growth in 2022, making it an attractive investment opportunity. In some of the company's larger projects that take many years to complete, the scale of capital growth can be evaluated on-site. For example, at Hendon Waterside, where construction has been underway for over a decade, investors who bought some of the first release of apartments in 2011 saw their homes increase in value by 132% up to 2022. Owners who rent out their apartments also enjoy annual rental yields of around 6%, making it an attractive investment option for those seeking rental income.
London's real estate market offers more than just financial returns. Its commitment to innovation and sustainability in creating homes that meet today's needs and anticipate tomorrow's demands appeals to modern investors. With a focus on energy-saving measures and net-zero carbon targets, many developments exemplify luxury, comfort, and sustainability. Middle Eastern investors are drawn to London's world-class education system, connectivity, and vibrant cultural scene, making it a lifestyle proposition beyond monetary gains.
The 2023 GCC Investment Barometer revealed that 33% of investors from Saudi Arabia, Qatar, and the UAE, with an average net worth of $208 million, had purchased property in London within the past year, exceeding all other major global markets. With an average investment of $90.79 million, this underscores the unparalleled appeal of London's real estate market to Middle Eastern investors, solidifying its position as the preferred destination for stability, growth, and long-term prosperity.
As the economic pulse of the UK beats strong, now is the opportune moment for investors to capitalise on the potential of London's real estate market and invest in a city that offers robust returns and a high-quality lifestyle proposition.
