UK property is proving to be a popular long-term investment with buyers from the Middle East, especially in up-and-coming areas of London, according to the latest insights from Barratt London.
Centrally located apartments in the city, a home-from-home for students attending the capital’s prestigious universities, and income-generating rental apartments are all adding to the draw of London property and maintaining its position as an investment hotspot.
An unexpected bonus for many international investors, especially for Middle East residents due to their currency being pegged to the US dollar, is the slight weakening of the pound.
Stuart Leslie, International Sales and Marketing Director at Barratt London, says, “We expect the Pound Sterling to remain an attractive proposition for overseas buyers, so it’s still a good time for investors who are looking to capitalise on this discount. We expect rental prices to continue to increase across London for the foreseeable future, providing great opportunities for investors looking to rent their properties.”
With the average rental price in London now at £2,480 (AED10,961) per calendar month, according to Rightmove’s Rental Price Tracker, an average £542,311 (AED2,397,014) London home could generate an annual rent of over £29,000 (AED128,180) in a single year.
Furthermore, rental incomes are going up at the fastest rate ever recorded, with hometrack reporting a 9.7% increase in the past year in London and a 15.7% in the rest of the UK. Despite this, demand is greater than ever, with Rightmove reporting in November 2022 that letting agents were experiencing the most competitive rental market on record, with an average of 36 enquiries per property and demand for rental properties up 23% in a year.
This is compounded by the demand for new homes in London, which is currently greater than the supply. The city needs around 52,000 new homes a year according to The London Plan (the Mayor of London’s framework for development in the city), but only 37,200 new homes were built in the financial year 2021/2022, increasing the pressure on the rental market as local buyers seek temporary rental accommodation while they wait to buy.
Addressing future earnings for investors, real estate in the UK has produced some impressive gains in recent years, with growth of 10.3%recorded in the year up to November 2022, according to the UK’s National Office for Statistics.
The outlook for 2023 is less clear. However, according to market reports, demand from overseas buyers could push London prices up by 5-8% in the coming year. Furthermore, property is a long-term investment, and while past performance can only act as a guide, according to the UK House Price Index, UK property as a whole in the decade from 2012 to 2022, increased in value by 5.7% a year, a 75% increase overall, while London property values climbed by an average of 5.8% per year, a 75.8% increase overall, during that period.
“The London property market in 2023 still offers opportunities for sensible investors. Market conditions and lending are stabilising, with mortgage rates dropping slightly. Meanwhile, new Prime Minister Rishi Sunak’s proposed banking reforms aim to make London one of the world’s most dynamic and competitive markets for financial services, bringing more eager renters into the capital, with further upward pressure on rents in the short term. This will help investors absorb higher interest rates and later benefit as interest rates start to subside in the next year or two,” concluded Leslie.
Barratt London’s top picks for Middle East investors
Newham – East London
The London Borough of Newham, home to the Olympic Park, is a strong performer, with house prices up 9% to £421,036 (AED1.86 million), according to One Global Labs. Meanwhile, CBRE data shows that the five-year growth forecast for the borough is 20%. The average rental yield is 5%, expected by CBRE to grow by 15% in five years. Barratt London’s award-winning Upton Gardens comprises 842 one- to four-bedroom homes on the site of the historic West Ham Football Club ground. Generous glazing and open-plan living areas create light and bright interiors, and every home has a balcony or terrace, as well as access to beautifully maintained roof gardens and an on-site gym. Only a handful of apartments are left for sale there, from £349,000 (AED1.56 million).
New Malden – West London
In the London Borough of Merton, close to Richmond and Wimbledon, one of Barratt London’s newest developments is taking shape, replacing a run-down former print works with 456 stylish new one-, two- and three-bedroom apartments. CBRE expects rental yields here to grow 12% and house prices to increase by 16% in the coming five years.
Harrow – West London
CBRE’s five-year outlook for Harrow shows a staggering 19% price growth and a rental growth of 14%. The current average rental yield is 4%. According to One Global Labs, house prices in Harrow are increasing 12.5% a year. Barratt London’s Eastman Village development, on the site of a former Kodak film factory in Harrow, will bring 2,000 modern homes as part of a larger £1.75bn (AED7.82 bn) improvement scheme, which will include two new schools, shops, leisure facilities, and commercial space, generating up to 3,000 jobs. The latest phase to launch is Fenton Apartments, featuring one-, two-, and three-bedroom layouts with spacious open-plan living and a balcony or terrace. From nearby Harrow & Wealdstone station, it’s a 13-minute train ride into central London. Prices start from £299,000 (AED1.33 million) for a one-bedroom, space-efficient SMRT home.