Middle East, N. Africa, E. Europe & the CIS

How do these regions fare in the prime London property market?

24 June 2013, Words by Paul Tostevin

 
Middle East & North Africa

People from the Middle East and North Africa purchase 5.4% of all prime property, divided equally between resales and new-build.

This group of buyers is distinctive in that only a minority (only 39%) are buying a main residence in London, 25% invest to become landlords. A high proportion of Middle Eastern buyers will be buying a second home, often for use during the summer months when London’s climate actually becomes a big attraction. London is now so established as a summer destination for many Middle Easterners, business and social engagements can be conducted as seamlessly in the capital as at home.

Although second home purchases by Middle Easterns constitute less than 3% of prime London’s market transactions, many are concentrated in very localised areas, creating a disproportionate impact in areas around Hyde Park, such as Bayswater. More than any other overseas group, those from the Middle East purchase in the core PCL districts; some 67% of their buying activity is directed here.

For many, London offers freedom from the cultural conformity of home. This is reflected in the type of property favoured in London: modern and filled with the latest technology.

Home market trends

• The Middle East market has rebounded in the wake of rising global oil prices, while political instability in parts of the region have only served to reinforce the appeal of London as a safe haven for wealth.

• Property markets in cities such as Dubai, which became over-supplied and over heated during the noughties, suffered dramatic price falls but there are now signs of recovery. This may serve to draw some investors who see recovery potential back to the region in coming years.

• Dubai is now emerging as a safe haven in a volatile region and is likely to provide London’s main competition among this buying group.

• Domestic demand for real estate is growing in MENA, and burgeoning middle class investors and homeowners are fuelling new domestic residential markets.

Eastern Eurpoe & The CIS

Russian buyers are the most high-profile and instantly recognised from this region, and tend to be associated with the image of ‘foreigners buying up London’. The true picture is more complex than images of Oligarchs buying property trophies.

Overall, buyers from this geographical group constitute only 5.1% of all prime London buyers, roughly evenly split between new home and second-hand purchases. Nearly half are buying a main residence but the propensity to buy second (or third or fourth) homes is high in this population - as is the appetite for buying to let.

This group is also more likely to be clustered in particular locations, being relatively recent arrivals in the London market and far less adventurous in terms of locational choice than some of their overseas or UK counterparts.

Address is paramount

Preferences are strongly for Knightsbridge and Belgravia (the kudos of the address is paramount). There are also clusters of Jewish Russians in North London.

In the same way that wealthy Muscovites have a city pied-à-terre and a larger property in the outer suburbs, Russians favour a central London property plus a home in the accessible countryside.

Counties like Surrey provide the very large properties with extensive grounds to provide the security that many of these buyers are used to in their own countries.

Trends in home market

• The Eurozone crisis has impacted parts of Eastern Europe in much the same way as it has Western Europe so much of the rationale for the acquisition of sterling-denominated assets apply here too.

• In some former CIS countries, property title is insecure and the real estate markets opaque, the Moscow market has shown high growth but is volatile. The UK is regarded as a safe, stable and secure haven within a few hours travel.

 

 
 

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Key Contacts

Paul Tostevin

Paul Tostevin

Associate Director
World Research

Savills Margaret Street

+44 (0) 20 7016 3883

 

Yolande Barnes

Yolande Barnes

Director
World Research

Savills Margaret Street

+44 (0) 20 7409 8899