The easing of travel restrictions between the UK and the UAE is set to lead to an increase in visits by investors from the Gulf looking to conclude deals on real estate in London.
The opening of a travel corridor between the two countries - amid the ongoing coronavirus pandemic - will release "pent-up demand as buyers look to transact prior to April 1 2021 due to the subsequent change in stamp duty regulation for non-UK residents", said Alex Casaki, head of London Desk at real estate consultants Cushman & Wakefield Core.
Casaki added: “Whilst travel restrictions have limited the opportunity for UAE buyers to physically view properties for most of 2020, significant demand has build-up on the back of a rise in enquires in early Q1 following the UK’s elections results in December 2019.
"This is further compelled by a sense of urgency with the upcoming increase in purchasing costs for non-resident buyers and signs of recovery in the pound that had considerably weakened in recent years due to political and economic uncertainty.”
According to Cushman & Wakefield Core’s latest London Market Update, the company has seen a "steady increase in demand from UAE buyers" as they identified opportunities with the aid of virtual viewings.
"However, most buyers, particularly those looking for properties at higher price points (above £5 million) were reluctant to conclude purchases virtually until changes in travel regulations permitted them to view these prime properties in person."
His comments come as flight bookings from London to Dubai have risen by 112 percent since the UK-UAE travel corridor was announced on November 12, according to official data.
The UK’s announcement to lift the 14-day quarantine restriction on arrivals from Dubai has had an immediate impact on travel demand in the opposite direction, Olivier Ponti, VP Insights at travel analytics firm ForwardKeys, told Arabian Business.
Casaki added: “With the UAE and UK travel corridor now open, the value on offer in prime central London districts represents a lucrative buying opportunity for UAE buyers who have historically taken a longer-term view of this market.
"With UAE buyers awaiting to conclude purchases upon physical viewings, we expect to see a release of pent-up demand as buyers look to transact prior to April 1 2021 due to the subsequent change in stamp duty regulation for non-UK residents.”
He said that prime London properties are currently priced nearly 20 percent lower than peak 2014 pricesm adding that UAE buyers are also aware of the window of opportunity to capitalise on further savings by finalising transactions before the end of the stamp duty holiday on March 31 2021, which coincides with the introduction of a 2 percent surcharge for non-UK resident buyers.
“Overseas buyers are expected to be increasingly active in London’s prime markets in the short term,” he said.
According to Cushman & Wakefield Core’s latest London Market Update, the London Heathrow and DXB route over the last few years has been the second busiest route by passenger volumes into London and is a key international link contributing directly to global investment and tourism inflows.
The UAE accounts for nearly 45 percent of all passenger traffic from the Middle East to London Heathrow.
Cushman & Wakefield Core said the London prime residential market has picked up pace in transaction activity since the easing of the UK’s lockdown restrictions in May and continued to see a significant increase in activity in Q3 with a rising number of offers and exchanges.
According to data from Lonres, the number of new instructions in September almost doubled compared with the same time last year and were 38 percent higher than the September average between 2010 and 2019. This rising trend continued with October seeing the fourth consecutive monthly rise in under offer volumes – up 10 percent on October 2019.
Casaki said: “While England entered its second lockdown in November, the property market was spared any significant restrictions on property viewings during this period, and with lockdown restrictions easing as announced on December 2, we expect to see continued interest from domestic and overseas buyers.”
Cushman & Wakefield Core's report noted a shift in buyer demand, with houses being more in demand than flats, predominately driven by domestic buyers incentivised by the stamp duty holiday and the need for further space in the wake of Covid-19.
The market over £2 million was busier in October than the market under £2 million, it said.
On the outlook for the London market, Casaki said: “We foresee the realisation of underlying and pent-up UAE investor demand as UAE buyers look to secure their purchases before the start of April next year and capitalise on this window of opportunity of multifaceted savings.”
He added: "Prime central London properties due to considerable softening since 2014 are priced competitively now and have historically recovered fastest from a downturn. We see no reason why this will not be the case again as the opening of travel corridors, easing of lockdown measures and the news of vaccine bodes well on global travel which is inherently linked to prime central London’s overseas driven market performance.
"Most market commentators are in a broad consensus that prices in prime central London are expected to recover in mid to late 2021 as global mobility improves, and the wealth eroded by Covid-19 is gradually restored with a rebound in capital markets."