Arab property buyers in London look beyond W1 postcode

Author: BILL FISHLOCKFri, 2018-01-19 22:27ID: 1516727393433103500LONDON: London’s upmarket residential districts such as Belgravia, South Kensington and Chelsea have long been a favored destination for Middle East investment.
But a report from London-based property consultants Cluttons suggests that international investors might do better in future to buy in less well-known fringe areas of the city such as Maida Vale, East Dulwich, Greenwich, Canada Water and Hammersmith. All are seen as emerging residential hotspots that are likely to attract more incomers and, in due course, better returns for investors.
“The top five hotspots identified are most likely to attract investments and residential migrants, not least due to their relative affordability, compared with prime central London locations,” said Faisal Durrani, partner and head of research at Cluttons, which produced the report, Residential Mobility in London, jointly with University College London.
With housing affordability a growing problem and average house prices in many areas of London out of the reach of many buyers — house prices in Kensington and Chelsea stand at almost 50 times annual median incomes — younger workers are letting rather than buying. Increasingly, young professionals are renting larger homes through shared tenancies in areas with good access to their workplaces.
House prices in central London have risen by more than 250 percent over the past 20 years and a ripple effect has inevitably boosted demand and prices in areas beyond the central core. Using spacial interaction models, the Cluttons report identified 47 housing submarkets and looked at key themes such as connectivity, population density and affordability as well as the socio-economic status of residents and house price trends.
It found that in expensive areas such as Mayfair and the City of London, residents tended to stay put, with high prices discouraging both inward and outward migration. But those aspiring to move to more desirable areas are often attracted to nearby districts.
Interest in Maida Vale, which is close to the prime areas of the West End and where the average house price is £1.3 million ($1.8 million) has spiked in recent years as it seen as offering good value compared with nearby areas such as Marylebone or Hyde Park, where house prices average £2.3 million. According to the report, Maida Vale is likely to continue to appeal to aspirational households.
Affordable locations such as East Dulwich (where the average house sells for £680,000), Greenwich (£495,000) and Canada Water (£841,000) emerge as the top three most attractive submarkets in the report, in that order. They offer good transport links, lower house-to-income ratios and are the most likely to attract residential migrants seeking to move on to the next rung of the property ladder. Maida Vale (with an average transacted value of £955,000) and Hammersmith (£1.28 million) are also set to remain attractive.
Other factors also come into play. In Blackheath in southeast London, a relatively low population density and good transport links have helped push up house prices by 30.5 percent in the past seven years, compared with 17 percent in prime central London.
For now, the prospect of Brexit does not appear to have deterred Gulf investors from the capital. “London remains the most preferred location for investment among Middle East family offices owing to factors like close trading links that date back to the 1800s, around 39 direct daily flights from the Gulf and a 175 percent rise in capital value in the past 20 years,” said Durrani. “For Middle East investors, the circa 15-18 percent decline in the value of sterling since just before the Brexit referendum has aided London’s appeal. This trend is likely to continue into 2018.”
Brexit also pales in comparison with some of the issues facing Middle Eastern investors closer to home and as taxes rise in the wake of the fall in the oil price. “The need for Middle East investors to identify asset classes which generate stronger returns has never been more pressing,” said Durrani.
Other agents in London have also seen investors looking beyond the center. “We’ve started to see more interest in areas a bit farther from prime central London such as Fulham and Battersea where the pound per square foot is more favorable,” said Frances Clacy, research analyst with Savills Residential. However, over the next five years, Savills is forecasting prime central London prices will outperform the outer market which it sees as more dependent on domestic buyers and potentially exposed to Brexit.
Savills recently identified northeast London as one of the most affordable parts of the capital, which is benefiting from new infrastructure such as the Crossrail link and has the potential to deliver thousands of new homes in the next few years. Areas such as Newham, Waltham Forest, Barking and Dagenham, Havering and Redbridge are experiencing growing demand from buyers priced out of more central, expensive locations.
Main category: Business & EconomyTags: Londonreal estaterelated_nodes: Mideast, Asian buyers dominate prime Central London property marketIndian buyers overtake Arabs as biggest investors in prime London property

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