UK Property offers ‘unique opportunity’ for investors in the Middle East

The ongoing uncertainty around Brexit and the plans of Theresa May’s government continue affect the value of the British pound.

This creates a golden opportunity for investors in the middle east to buy property in the UK, given the exchange rate, and the associated buying power this gives Middle East investors. Combined with the low interest rates on mortgages, this creates an attractive environment for UAE investors.

Many spectators foresee that the pounds value could increase, should the UK government agree a trade deal with the EU. Ultimately, this would negate the benefit currently enjoyed by those who buy dollar related currencies.

This combination of circumstances has led to reports of a sharp rise in investors from the Middle East actively seeking to purchase UK property. While the interest from Middle Eastern investors in the UK property market peaked in 2016, accounting for more than a fifth of sales to international investors in London, it is rising again as a proportion of foreign buyers.

That said, Knight Frank have reported that average house prices in prime London neighbourhoods stood 2.3 per cent lower in August 2018 than a year earlier after dipping 0.7 per cent in 2017 and 6.3 per cent in 2016. While house price rises nationally have slowed to less than 5% per year. According to data from the Office for National Statistics, average house prices in the UK increased by just 3.0 per cent in the year to June 2018.

There are further concerns about the UK housing market in the event on a no deal brexit, which could potentially push Britain in to a recession, leading to potential unemployment, and a rise in interest rates which could lead to landlords and homeowners being exposed. These predictions could be considered extreme, but most expect price growth to soften in the coming years.

Knight Frank expects average UK house prices to increase by just 1 per cent in 2018, 2 per cent in 2019 and 3 per cent in 2020. Savills predicts increases of 1 per cent in 2018, 2.5 per cent in 2019 and 5 per cent in 2020.

National house price statistics also belie a more mixed regional picture with average house prices in regional cities such as Edinburgh, Birmingham and Manchester rising by between 6 and 8 per cent last year – a scenario likely to continue growing over the next few years.

This has led to UAE investors seeking higher yields and higher potential growth in more regional cities such as Manchester and Liverpool, while others hold off until there is more certainty over where the UK will stand with the EU once the dust has settled.

UAE Investors face a choice to plough ahead and buy while the dirham is strong and the market less competitive but risk losing money if the economy stalls and property prices fall, or wait until the market is more stable but risk losing out on lucrative currency gains. 

Amongst Brexit uncertainty, demand outstripping supply will continue to produce opportunities for investors. Especially those with a long term investment outlook.

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