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Middle East investors keep snapping up trophy assets

Dubai: High net worth investors and institutions from the Middle East were generous in spreading their wealth across Europe’s commercial property in 2013-21 of the transactions valued at €100 million and over were conducted by them during the year.

Asian buyers, led by the Chinese, accounted for a further 22 such transactions, according to new figures released by the global consultancy CBRE, which also found that London topped the list of European investment destinations with €32.2 billion worth of commercial realty transactions. In all, European cities recorded €165.6 billion in commercial property deals last year.

The priciest deal was a £1.7 billion deal in London by St. Martins, owned by the Kuwaiti sovereign wealth fund (SWF). In fact, there was another deal valued at the same level, this one engaged in by Singapore’s SWF, GIC. Both transactions were done late last year.

“The UK had a remarkable year in 2013… particularly the last four or five months when investment activity jumped sharply,” said Simon Barrowcliff, executive director for Central London Capital Markets, CBRE. “The rest of the UK saw a staggering 75 per cent year-on-year increase in the total value of activity as investors searched for yield.

“The improving UK economy is enhancing the prospects for commercial real estate in the rest of the UK and encouraging even cross-regional investors to venture outside London.”

It is interesting that Middle East investors continue to see a lot of residual value in London property, of which the top-end ones recorded value gains well over the market average. In fact, there was only one UK-based investor who could get a hand on a €100 million plus property last year. They were just getting crowded by Middle East and Asian investors.

At the same time, the UK government was raising the barrier on premium properties being acquired as trophy assets by overseas investors. A capital gains tax will be imposed on overseas buyers from next year.

However, market sources say Middle East’s high net worth investors are likely to overlook that. “Capital gains tax is apparent in most markets around the world and now the UK will become no different,” said Paul Preston, who heads IP Global’s regional operations. “Markets where there is no CGT paid by foreign investors, have historically been volatile markets.

“I personally think that more and more people are buying property in London for investment purposes, whereas in years gone by, the trend was GCC buyers buying in London more for personal use.

“People who have the capabilities for investing millions of pounds are still buying the property they want and not looking to invest lesser amounts due to ‘Mansion Tax’. What we are seeing is that if people want something, they buy it.”