Two unnamed UAE investors purchased two residential buildings valued at around $29 million in London's high-end Knightsbridge and Mayfair areas in the past three months - The Emirates Business is reporting.
According to Benham and Reeves, a UK-based lettings company, until now they have recorded confirmed UAE-based investors for assets worth $118 million to $147 million. Last month the Harrods Estates, another UK real estate firm, also announced that Middle Eastern investors constitute 33% of their sales and rentals.
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Two UAE-based individuals have purchased two residential buildings valued at £20 million (Dh109 million) in London's high-end Knightsbridge and Mayfair areas in the past three months, according to a UK-based lettings company. The buyers were not named.
Marc von Grundherr, Director, Benham and Reeves Residential Lettings, told Emirates Business: "In the past three months alone, we have concluded confirmed investments worth £20m from the two clients in the UAE who have purchased the two buildings in London. Until now, we have recorded confirmed UAE investors for assets worth £80 to £100m. They are residents of the UAE."
The deals were completed in partnership with its UAE-based sister company, IS Real Estate.
In an interview with this newspaper last month, Fadi Moussalli, Regional Director, International Capital Group, Jones Lang LaSalle, said the institutional investment in 2009 into the UK's commercial properties from the Middle East and North Africa region touched $4.5 billion (Dh16.5bn), of which $4.2bn went into the commercial properties.
Grundherr said UAE investors have been drawn to invest into the UK due to the weakening of the pound and lower mortgage rates.
"They have recognised 'good value' properties in Central London's most established areas, namely Knightsbridge, Kensington, Mayfair and Holland Park, which have recently seen an overall 45 per cent increase in sales from foreign buyers," he said.
"Mortgage interest rates are running low in the UK at an average of around 2.5 per cent per annum. This makes buying property in London attractive. There are now more opportunities to buy in key central areas, some in the newer developments on the outskirts of the town such as Beaufort Park in London NW9, which are prime areas from a rental yield perspective."
Grundherr believes investors into the UK market are mostly individuals or family-owned businesses who are looking to invest into the UK real estate market on a long-term basis.
"Lots of our UAE clients are looking to buy and have been buying properties in the UK in the past three to six months. One in three of our clients are looking to buy properties in the UK with 50 per cent of them ending up buying there."
Grundherr said average rental yields of properties in London range between 2.5 per cent and 6.5 per cent per annum. "In Central London, one-bedroom and two-bedroom properties have seen a strong rate of growth in February and March, and are now just 10 per cent below the market peak of March 2008. February saw its highest growth since August 2007 at 3.2 per cent from the previous month."
Locales in Central London such as Wembley, Stratford or Elephant and Castle give a rental yield of around 6.5 per cent per annum. "A one-bedroom in Beaufort Park is currently priced £220,000 yielding a rental income of £1,000 a month. While, a two-bedroom apartment in Beaufort Park is now priced £270,000 yielding a rental income of £1,600 per month."
Grundherr said the average rental yields in these areas were around 6.5 per cent per annum.
"This area currently attracts yields in the region of six per cent to 6.5 per cent, which is far greater than properties in Central London. However, a purchase in these prime areas offers long-term security and has an element of client recognition for the popular areas in London." In terms of capital appreciation, prime central locations in London such as Knights Bridge, South Kensington and May Fair offer rental yields of about 2.5 per cent.
"A one-bedroom apartment in Knights Bridge, is currently priced £600,000 and a two-bedroom is around £1.2 million. Rentals for a one-bedroom range around £2,000 a month and £3,000 for a two-bedroom apartment. Rental yields in these areas are around 2.5 per cent per annum."
Grundherr said real estate prices in the UK went up around 10 per cent in the past one year due to limited supply of properties. "Over the past two years, supply of properties in the UK that people can buy has really dried up. Only people forced or keen to sell have been able to sell their properties indicating that prices have gone up as people do not want to sell it at reduced prices."
The Centre for Economics and Business Research, a London-based group, said last week that UK house prices will extend their recovery this year as low borrowing costs and shortage of homes support the property market. Average mortgage interest rates are expected to drop by about one per cent to three per cent by the start of 2011. Bloomberg said Bank of England's first increase in its interest rate could be as much as two years away and possibly more so.
UK house price gauge posts first gain in five months
A UK house-price gauge posted its first increase in five months in April as warmer weather helped lift new buyer enquiries to the highest since December.
The number of real-estate agents and surveyors saying prices rose in the past three months exceeded those reporting declines by 17 percentage points, compared with nine in March, the Royal Institution of Chartered Surveyors (Rics) said in a report. A separate British Retail Consortium survey showed stores posted their largest decline in sales in more than a year.
The Rics gauge fell for four months as cold weather, political uncertainty before the election and an increase in properties for sale eroded momentum in the housing market recovery. Potential homebuyers, who delayed making a purchase until after the May 6 ballot, may now return to the market, leading to a "post-election bounce", Rics said.
"For much of 2010, the housing market has been under the shadow of the general election with the gap between supply and demand growing wider," Rics spokesman Jeremy Leaf said in a statement. "However, the start of spring has seen renewed optimism with the good weather improving sentiment."
More surveyors expect an increase in both sales and house prices in the next three months, Rics said. The balance of those expecting prices to gain through July exceeded those predicting decreases by seven points in April, compared with minus two in March.
New instructions outpaced new buyer inquiries last month, with a balance of 11 percentage points of surveyors reporting an increase in the number of homes for sale, Rics said.
That was down from a reading of 21 in March, the group said. The proportion of surveyors saying new buyer enquiries increased rose to eight percentage points from one.
UK house values declined last month as more people put their property on the market, Lloyds Banking Group's mortgage-lending unit Halifax said on May 7. While interest rates remain at a record low, banks are still granting less than half the number of mortgages they approved at the peak of the housing boom. The Bank of England yesterday kept its benchmark interest rate unchanged at 0.5 per cent.
Retail sales values fell 2.3 per cent last month from a year earlier at stores open at least 12 months, partly due to the timing of the Easter holiday, the BRC survey showed. The decline was the biggest since December 2008.
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