< PreviousFINAL KEYS 80SEPTEMBER 2024 sports grounds, surrounding properties, and hospitality infrastructure in the UK. Central London, specifi cally in unique neighbourhoods like Mayfair and Knightsbridge, has been a preferred destination for GCC nationals looking to visit or invest in properties in the UK. These areas off er urban walkability, which is a contrast to countries like the GCC, the US, and Australia where cars are the primary mode of transport. How does investing in UK real estate fi t into a broader investment portfolio for GCC investors? Firstly, many GCC investors have diversifi ed international portfolios, and investing in the UK allows for geographic diversifi cation. This helps mitigate political and economic risks associated with investing in a single country, as the pound sterling is generally known for its stability. Furthermore, investing in UK real estate, especially in Manchester, Newcastle, Leeds, Bristol, Edinburgh, and Birmingham, can provide lucrative rental returns. Moreover, the UK property market has a track record of appreciating in value over time, off ering the potential for profi t upon sale, on top of rental yields. This serves as a valuable safeguard against riskier investments. Additionally, real estate serves as a tangible asset, which introduces a unique risk/return dynamic to a portfolio. In an uncertain economic climate, especially with rising infl ation, risk-averse investors may fi nd comfort in the stability provided by this physical asset. What are the specifi c property types and locations in the UK that are most attractive to GCC investors? According to our research, GCC investors are placing their focus on asset classes within the ‘living sector’ at present. This encompasses a wide array of assets, with several standing out as particularly favoured, including retirement living, private rental schemes, co-living, and purpose-built student accommodation (PBSA). There is currently a signifi cant undersupply of housing in the UK, presenting a great opportunity in this sector. This shortage is particularly evident in university cities due to the expansion of university places for both, domestic and international students. In cities like Nottingham, where student population have grown rapidly, the demand for purpose- built accommodation has outstripped supply, leading to a shortage of beds. While GCC investors remain attracted to London they are now willing to consider Left: There is a signifi cant undersupply of housing in the UK; Andy Thomson, Head of Real Estate Finance and Private Banking at BLME Right: UK property market appreciates in value over time; Saudi Arabian sovereign wealth fund bought Newcastle United football team and is redeveloping city centre CWPME_Sep2024_78-82_Final Keys_13365100.indd 80CWPME_Sep2024_78-82_Final Keys_13365100.indd 8023/08/2024 15:1723/08/2024 15:17FINAL KEYS 81SEPTEMBER 2024 The increasing number of GCC club owners is driving further investment in sports grounds, surrounding properties, and hospitality infrastructure in the UK” other locations in the UK, which tend to off er higher-yielding properties. They are also attracted to regeneration projects, which often involve a change of planning consent for brownfi eld urban sites. A common route we’re seeing is converting offi ce space to residential apartments, as large offi ces are becoming less necessary with the proliferation of homeworking. Among the top regeneration projects in North West England include those in Salford, Manchester and Edinburgh City Centre. In the North East, Saudi Arabia’s sovereign wealth fund, which purchased football team Newcastle United, is redeveloping large parts of the city centre in partnership with the Reuben Brothers. GCC investors are also taking advantage of the opportunity to realise lucrative ‘green premiums’ by upgrading assets that fall below anticipated new environmental requirements and selling them at a profi t. Growing investment appetite for good quality and fl exible assets with strong sustainability credentials is an emerging trend, and poorly designed buildings with a low Energy Performance Certifi cate (EPC) rating are currently experiencing signifi cant price drops. A strong opportunity exists for investors to add value and benefi t from strong returns by retrofi tting and improving the quality and fl exibility of older building stock and increasing its EPC rating. What are the fi nancial benefi ts and risks associated with investing in UK real estate for GCC investors? The UK off ers a stable and transparent market supported by robust legal regulations, making it an appealing choice for investments. Couple this with competitive rental yields in major UK cities, consistent historical appreciation of property values, and high rental demand in key sectors, the UK real estate market presents numerous opportunities for GCC investors. The UK also has a Sharia-compliant fi nance sector, making it easier for local banks and advisers to assist with compliance with UK fi nancial regulations while following Islamic fi nance principles. However, potential GCC investors in UK real estate should be aware of proposed tax system changes aff ecting non-UK domiciled individuals, known as non-doms. Currently, non-doms are taxed on UK income only, but new policy changes may require them to pay taxes on worldwide income after four years of residency. This change would aff ect only GCC nationals staying in the UK for more than three months in a tax year, which many do not. Before purchasing a property, what kind CWPME_Sep2024_78-82_Final Keys_13365100.indd 81CWPME_Sep2024_78-82_Final Keys_13365100.indd 8123/08/2024 15:1823/08/2024 15:18FINAL KEYS 82SEPTEMBER 2024 of due diligence should GCC investors conduct? Firstly, adopt an active asset management strategy. The strongest returns will be achieved by creating value to bring assets up to spec. While some property prices look attractive in the market, and the cost of fi nancing is set to drop, only investors who get it right can reap the benefi ts. Secondly, to help develop an active asset management strategy, use on-the-ground advisers or potentially joint venture partners. While having a robust and predictable legal framework, we always recommend consulting with UK-based advisers with local expertise. They may also be able to help with spotting new opportunities in the market. Local knowledge is invaluable for all real estate assets. What future trends do you foresee in GCC-UK real estate investment relations? The relationship between the UK and the GCC is expected to strengthen. Last month saw the beginning of a long-awaited decrease in interest rates, as infl ation reached the Bank of England’s target of 2%. The focus now shifts to the extent and pace of future rate cuts to attract more GCC investment in the UK real estate market. Currently, 5-year interest rate swaps hover around 3.7%, indicating market expectations of additional rate reductions in the near term. The reduction in interest rates coincides with the re-establishment of political stability after the Labour Party won the July 2024 General Election. The newly elected government is tasked with addressing the longstanding housing shortage in the UK by committing to build 1.5 million homes during their term. This ambitious goal will necessitate foreign direct investment in the UK’s real estate market, presenting considerable opportunities for investors from the GCC in the future. Additionally, just last month, the UK Government announced its priority to agree to a Free Trade Agreement (FTA) with the GCC. Achieving an FTA with the GCC would be a real boost for the UK real estate market, allowing investors from both sides to benefi t from more favourable market conditions. Left: Investing in UK real estate, especially in Manchester, Newcastle, Leeds, Bristol, Edinburgh, and Birmingham, can provide lucrative rental returns CWPME_Sep2024_78-82_Final Keys_13365100.indd 82CWPME_Sep2024_78-82_Final Keys_13365100.indd 8223/08/2024 15:1823/08/2024 15:18Transforming Cities, Shaping the Future We design with purpose to create a better world For over seven decades, Meinhardt has been at the forefront of transformefront of transforming cities through innovative planning, design, and engineering solutions. Today we ering solutions. Today w are leading innovation and digital transformation to provide sustainable solutionsprovide sustainable solut ns. Meinhardt is acting as lead consultant for NEOM’S Sindalah Island Four Seasons Hotel and Resort info@meinhardtgroup.com |www.meinhardtgroup.com follow us Untitled-6 1Untitled-6 129/07/2024 21:1529/07/2024 21:15www.mered.ae LIVE THE ICONIC LIFE Experience the new paradigm of luxury in Dubai Breathtaking Sea Views | Exclusive Amenities | Exquisite Wood and Marble Finishes | Advanced Technologies for an Elevated Lifestyle Explore More Untitled-8 1Untitled-8 126/08/2024 19:3126/08/2024 19:31Next >