How Is Brexit Uncertainty Impacting Foreign Property Investment in the UK?

Recent research indicates that the ongoing Brexit chaos hasn’t deterred foreign investors from investing in the UK market. In fact in many cases, it seems that Brexit’s effect on the pound has encouraged even greater investment with Knight Frank research showing that the UK property market is top of the preferred investment list for 2019. 

While overall London prices did drop after the referendum result in 2016, Savills reported that in the first quarter of this year the price fall rate slowed to -0.3%, the smallest quarterly fall since the referendum. In addition, Knight Frank’s Global Capital tracker currently shows that there is £40bn targeting assets in London this year – a good sign for those in the UK property industry. 

UAE Investors

For example our team at ambT Property Partners are aware of several large companies in the UAE that are maintaining their exposure levels in the London market while others are planning their entry. 

Dubai-based Sobha Realty, which is known for its multi-billion dollar projects in Dubai, is about to open a London office and Abu-Dhabi based LuLu Group recently announced that it will open the Great Scotland Yard Hotel towards the end of 2019. LuLu Group has spent £75m refurbishing the property having acquired it in 2016 but it seems the events of the last few years haven’t prompted them to back out. 

I suggest the reason behind the seeming lack of hesitation from UAE investors is their almost exclusive interest in prime London property. While some areas in the capital are struggling with sales, prime property in central London is still regarded as a safe bet, retaining its appeal and value. In addition, London’s long-standing position as a world centre for trade and investment means it has held its desirable appeal, particularly for investors from the Middle East and America who are dollar-based.

Of course there will always be more risk-adverse investors, many of whom have adopted a wait-and-see approach until the Brexit outcome is known but for those investors who don’t mind a bit of risk, the drop in prices is proving very appealing. 

Asian Investors

According to Knight Frank, last year London received the largest volume of commercial property investment globally at £16.2bn, beating New York, Tokyo, Paris and Singapore. Also last year central London was the world’s most actively traded office market with the largest source of capital deriving from Asia (accounting for 40% of investments) so it seems in the London office market Brexit uncertainty doesn’t seem to be having much effect. 

Where some Chinese buyers have retreated slightly due to the imposition of stringent capital controls introduced by the Chinese government, Hong Kong investors seem to have stepped in to keep investment from Greater China high. One of the more recent high profile purchases by a Hong Kong private investor is that of Lucie Campbell at 26 New Bond Street for £28m. 

For Asian buyers in particular London is not just attractive because of the competitive value it currently offers but also because of the safety the UK provides in terms of law, market transparency, liquidity and language. And of course for many Hong Kong investors London is a familiar place due to many Hong Kong people choosing it as a place to study, work or live. The so-called “Trump effect” also seems to be putting Asian investors off buying in the US right now. 

European Investors

Many European investors are also maintaining their interest in the market with Swiss pension fund AFIAA recently announcing that it will convert Schroder’s £200m former headquarters into a 170,000 square feet building. Speaking about the investment decision the AFIAA’s head of asset management international, Bardo Magel, said: “We believe London is one of the world’s most important and dynamic centres for financial services and the new media and tech industry”. 

I hope you’ve enjoyed my article and found it useful. Please let me know by leaving a comment. And if you’re considering an investment in the UK market please do get in touch with me in my capacity as a founding member of ambT Property Partners to discuss our current opportunities and how we can help.

Michael.d.oliver@ambtpropertypartners.com

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