Middle East buyers to shrug off fall in London house prices

Analysts are predicting that Middle Eastern investment in London property will not drop following a report that revealed house prices in the UK capital have fallen for the first time since 2009.
The report by mortgage lender Nationwide showed that prices in London fell by 0.6 percent year-on-year in the latest sign of a slowdown in the housing market since last year’s Brexit vote.
The capital, for a long time now a magnet for global property investors, represented the weakest performing region in the UK for the first time since 2005.
The average price of a house in the capital is now £471,461 ($631,596). Overall prices across the UK rose by 2 percent, down from 2.1 percent in August, representing the weakest pace of growth since June 2013.
Lauren Kemp from London Central Portfolio, a real estate investment advisory company, explained that the Nationwide report took into account the slump in buy-to-let purchases, and so predicted that Middle East buyers would shrug off the fall in London property prices.
“Those buyers at the higher end, between £2-5 million will still continue to buy as and when, and will buy places as a base or to simply park their money. Investors may wait to see if prices will fall more so they can get more for their money, but we are sure they’ll come back in,” Kemp told Arab News.
She added that the fall in prices could be down to the glut of new developments, some of which are witnessing price reductions. This too, she said, did not affect Middle Eastern buyers.
“So far this year 21 percent of our buyers have been from the Middle East, that is a slight fall from the previous year, but only a slight one,” Kemp said.
“The Middle East buyers are sophisticated enough to know that London is not a homogenous market.
“You can’t compare the new build developments with where they tend to buy in the prime areas, such as around Harrods and Knightsbridge, where we do a lot of our work. The prices are not coordinated and Middle East buyers know that.”
The London housing market has been booming for years and such have been its year-on-year increases until now that Ashley Osborne, Colliers International’s head of UK residential, claimed that the fall in prices would not put off international buyers.
“We’ve actually seen an increase in international buyers over the past two to three months,” Osborne said.
“Brexit has been priced into the market and London is still seen as a good and safe investment.”
He added that the drop in London house prices would be seen as insignificant, and with exchange rates still very favorable to Middle Eastern buyers, that would inform their decisions on whether or not to buy more than any slight fall.
“With the way the exchange rate has gone, the pound is still soft and that will drive sentiment more than what is only a slight and negligible fall in prices,” Osborne added.
British house prices were rising by more than 5 percent a year at the time of last year’s referendum decision by voters to leave the EU, according to Nationwide’s index, almost three times the current pace of growth.
The Bank of England is widely expected to raise interest rates soon, possibly as soon as Nov.2 at the end of its next policy meeting. But Nationwide said a modest rise by the BoE would probably have only a small impact on house prices.