With its compelling blend of stability and opportunity, the UK has emerged as a relatively safe haven, drawing in unprecedented investment.
In 2023 alone, GCC investors, led primarily by those from the UAE and Saudi Arabia, poured $2.35 billion into UK real estate, and projections indicate that the number is set to rise to $3.5 billion this year.
These numbers demonstrate UAE investors’ trust and confidence in the UK property market, but what exactly is driving this steady and growing stream of investment?
High demand and limited supply
A major driver is the UK’s favourable market conditions. Demand for housing consistently outstrips supply, a trend that has been a consistent feature of the market for many years. According to the Nationwide house price index, the average UK home price has increased by a remarkable 63 percent over the past decade. These figures are even more pronounced in London, with yearly average house prices – excluding first-time buyers – seeing a 72 percent increase in the last decade.
This situation is unlikely to change soon due to the market’s chronic shortage of available homes, with supply failing to keep pace with the growing demand. At current construction rates, it could take up to 15 years for the supply to adequately meet the ongoing demand. This persistent imbalance suggests that investors can anticipate continued reliable returns and robust rental growth for the foreseeable future.
According to Savills, overall, UK property values will rise by 21.5 percent over the coming four years, while rental prices are anticipated to see an increase of 8.5 percent.
These returns are also being magnified by attractive exchange rates.
Currency leverage
A major draw for UAE property investors continues to be the depreciating British pound against major currencies such as the US dollar. After reaching its lowest level in nearly four decades against the greenback last year, the pound still offers a competitive edge for UAE buyers relative to the dirham, which is pegged to the US dollar.
This favourable currency situation provides a significant incentive for UAE investors, making UK properties more affordable and potentially more profitable.
Most of this investment is predictably directed towards London. However, while the capital remains a prime destination, there is a growing awareness of the diverse opportunities available throughout the country. As a result, investors are spreading their nets a bit wider and increasingly looking at opportunities in other established cities like Manchester, Birmingham and Liverpool.
Regional appeal
As the flagship cities of the Northwest and Midlands, Manchester, Liverpool and Birmingham have received a huge level of interest from UAE investors and developers in recent years.
Despite the prestige and attraction of the capital, the ROI in these areas exceeds that of London, making them an attractive alternative to the capital’s more competitive and crowded market.
Property values in Liverpool surged 41 percent in the five years preceding 2022, with Manchester and Birmingham not far behind, rising 35 percent and 27 percent, respectively. These represent the highest residential property price growths in the UK and significantly more than the 10 percent registered in London.
With these cities undergoing major regeneration and offering lower entry costs than the capital, they’re proving to be high-yield investment hotspots for Middle Eastern buyers, offering them the chance to invest in a rising market and diversify their portfolios with high-potential properties outside the capital.
There is also a reliable trend of migration towards these urban centres for better employment and educational opportunities, which ensures that the demand for housing in these areas will persist.
UK-GCC ETA visa scheme
While the financial gain is obviously a major driver of the UAE-UK investment, there’s also a logistical ease that supports these transactions.
The recent introduction of the UK-GCC ETA (Electronic Travel Authorisation) visa scheme has simplified the travel process considerably, making it more straightforward for investors from the Gulf Cooperation Council countries to visit the UK for short stays related to managing and assessing real estate investments.
This visa scheme streamlines the entry process for GCC nationals, allowing them to travel to the UK for short stays, without the need for a full visa application process each time. This convenience not only saves time but also reduces the bureaucratic overhead associated with investing in overseas property.
The scheme is particularly beneficial for investors who need to visit the UK frequently and encourages more frequent and prolonged engagement with the UK market. Investors can maintain a closer connection with their investments and take prompt action when necessary.
The UK’s legal protections is another logistical advantage that appeals to UAE investors. Known for its clear regulatory frameworks and strict adherence to the rule of law, the UK offers a level of security and predictability that is highly valued by UAE investors.
Future outlook
Amid ongoing economic headwinds and an uncertain economic outlook in Europe and the US, the appetite of UAE investors for the UK property market is likely to continue. With its surplus demand, reliable investment returns and the availability of diverse assets across the country, it’s a market that will continue to provide robust and reliable growth.
However, this strong preference for the UK isn’t solely due to the solid returns the property market has consistently delivered. It also stems from the historical links these countries have, the well-established relationships with developers and agents, the absence of any language barriers, and the quality of life the UK offers.
While London has traditionally been the focus and held all the prestige, the ongoing regeneration across other regions of the UK presents increasingly attractive investment opportunities. As these areas develop, they’re drawing more attention from GCC investors, indicating that this trend of investment flow is set to continue. As the market evolves, staying attuned to these shifts will be crucial for investors aiming to maximise their returns in this dynamic landscape.