Gulf investment in UK property expected to reach $3.2bn in 2024

LONDON — Gulf investment in UK real estate is expected to reach 2.5 billion pounds ($3.2 billion) in 2024 as British property prices continue to fall, according to research from one of Europe’s largest Islamic banks, Bank of London and The Middle East (BLME).

High inflation in the United Kingdom is causing domestic mortgage rates to hit the highest levels since the 2008 financial crisis, with a typical two-year deal rising to 6.66% in mid-July. This means less people want to buy property, as it is less affordable, and reduced demand can cause real estate prices to fall. 

A new report from the London-based bank released Tuesday said there were three reasons for this anticipated increase, the first being the strength of the Gulf economies and the need for asset diversification. It also said that there is projected growth in favored asset classes such as purpose-built student accommodation and a continued Gulf Cooporation Council (GCC) appetite for UK property assets outside of the capital London.

According to the report, the combination of falling UK property prices, favorable exchange rates and fast-paced growth in the GCC has led to pent-up investor demand, with greater affordability being the biggest factor affecting the appetite for UK real estate right now. BLME said that GCC investors are capitalizing on lower property valuations and that it anticipates those investors refinancing when interest rates start falling.

Advisers and intermediaries who work with BLME predicted purpose-built student accommodation would see the biggest investment growth in 2023. The asset class has long appealed to GCC investors, with a large number of Middle Eastern students at British schools and universities and a low rate of tenant default. The bank pointed out that in 2022, both Saudi Arabia and the United Arab Emirates made the list of the top 10 countries outside the European Union for students coming to study in the UK.

London tends to be the city of choice for GCC real estate investors, but the bank said that those investors are also looking at other British towns and cities, with Manchester, Birmingham, Newcastle and Bristol being popular investment locations. Gulf investors' preferences are also shaped by globally recognized cultural assets like the Premier League, BLME said. Some own Premier League clubs, such as Manchester City and Newcastle United. A Qatari royal is also in the running to buy Manchester United.

“For GCC investors, the UK remains an attractive prospect in spite of geopolitical and economic uncertainties,” wrote Andy Thomson, head of real estate finance and investments at BLME, in the statement. 

“With a perfect storm of strong dollar-pegged GCC currencies, surplus cash following last year’s oil boom and falling UK asset prices, investors in the Middle East have a golden opportunity to spot a bargain while property prices are low, with the option to refinance when interest rates fall. 

“UK-based advisers can provide crucial insights on tenant quality and asset locations and can pinpoint opportunities for investors to add value,” he added.