As we look back on a turbulent first half of the year, with financial instability and a lack of economic growth spreading across borders and industries, some regions have fared much better than others.
Gulf economies, for example, have been buoyed by rising energy prices at a time of mounting global economic headwinds, with Saudi Arabia’s economy growing 8.7% in 2022, the highest rate among G20 countries. The UAE economy showed a 7.6% growth rate last year with trade volumes reaching AED1trn (£215bn) and re-exports hitting AED300bn (£646bn) for the first time in history.
As a result, many Gulf nationals have seen their wealth expand compared with other countries. These favourable conditions and strong levels of wealth creation have increased the appetite for capital deployment in European real estate markets.
The number of buyers from the Middle East acquiring property in central London hit a four-year high in the second half of 2022, a report by Knight Frank this year found, as investors became buoyed by the prospect of price adjustments and favourable currency conditions.
At Mayfair Private Office, we are in a unique position covering the whole breadth of the market, from fund investment to private wealth management, and have developed several successfulreal estate portfolios for Middle East clients.
We are expecting Gulf Cooperation Council (GCC) investment activity in the UK to increase further this year, as cash-rich Middle East investors take advantage of impressive growth figures, currency benefits and reduced competition for UK assets from large institutions.
We’ve seen private capital being able to compete more easily with institutions and private equity firms, which are more sensitive to rising debt costs and generally hold assets for shorter periods. The ongoing fluctuation in currency, energy prices and inflation will increase volatility in debt costs, providing further opportunities.
Middle East students have been studying at British universities for years and there are mature legal and financial systems in the UK, which has more Sharia-compliant banks than any other western country. The current UK market conditions have presented opportunities for Gulf-based private offices to grow their real estate portfolios in London and the wider UK.
For example, we have been working with a family from Saudi Arabia where we helped secure an off-market lateral five-bedroom flat in Kensington in 2019. We are now looking to advise on their investment mandate here in London and have been bidding on multiple residential multi-unit deals.
The fact that oil-rich Gulf states have money to spend isn’t necessarily new. The region’s 10 largest sovereign wealth funds combined manage nearly $4trn (£3.1trn), according to the Sovereign Wealth Fund Institute. That’s more than the gross domestic product of France or the UK – and it doesn’t include private money.
London has long been considered a safe haven due to the stability of the city’s property market. Dollar-pegged private offices in the Middle East and funds who are looking to diversify and strengthen portfolios in the UK will become a key part of the global real estate capital investment landscape this year.
Cameron Smith is co-founder of Mayfair Private Office
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