UK real estate market set to see £2.5bn in GCC investment over 2024, predicts BLME
Middle Eastern investment in UK real estate is about to ramp up as UK property prices continue to fall[1], according to research from one of Europe’s largest Islamic banks, Bank of London and The Middle East (BLME). Following a year of challenging macroeconomic conditions, defined by the highest interest rates since the Global Financial Crisis, BLME now expects to see £2.5 billion of Gulf Cooperation Council (GCC) investment in 2024 as GCC investors prepare to capitalise on lower asset prices across residential and commercial assets[2].
BLME’s new report, Strong Foundations, suggests three key reasons behind the anticipated increase:
- The strength of the Gulf economies and the need for asset diversification
- Growth in favoured asset classes such as Purpose Built Student Accommodation
- Continued appetite for regional assets
According to the report, the combination of falling UK property prices, favourable exchange rates and rapidly accelerating growth in the GCC has led to pent up investor demand, with greater affordability the biggest factor affecting appetite for UK real estate at present. GCC investors are capitalising on lower property valuations, with investment experts anticipating they will refinance when interest rates start falling.
Advisers and intermediaries who work with BLME predicted Purpose Built Student Accommodation (PBSA) would see the biggest investment growth in 2023. This is an asset class that has long appealed to GCC investors, with the longstanding affinity of Middle Eastern students with the UK’s schools and universities and the low rate of tenant failure. In 2022, both Saudi Arabia and the UAE made the list of the top ten countries outside the EU for students coming to study in the UK.(3)
While London remains the city of choice for GCC investors, with all experts describing it as a preferred investment location of their clients, investors are also looking to the UK’s regional towns and cities. The likes of Manchester, Birmingham, Newcastle and Bristol were highlighted as popular investment locations, with Gulf investor preferences also shaped by globally recognised cultural assets like the Premier League.
Andy Thomson, head of real estate finance and investments at BLME, commented: “For GCC investors, the UK remains an attractive prospect in spite of geopolitical and economic uncertainties. With a perfect storm of strong dollar-pegged GCC currencies, surplus cash following last year’s oil boom, and falling UK asset prices, investors in the Middle East have a golden opportunity to spot a bargain while property prices are low, with the option to refinance when interest rates fall. UK-based advisers can provide crucial insights on tenant quality and asset locations, and can pinpoint opportunities for investors to add value.”
[1] https://www.msn.com/en-gb/money/other/house-prices-predicted-to-fall-12pc-with-little-prospect-of-bounceback/ar-AA1e6xRw
[2] https://www.capitaleconomics.com/blog/commercial-real-estate-next-shoe-drop
[3] International Student Statistics in UK 2023 – Study in UK (studying-in-uk.org)
