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IS LONDON STILL THE NO.1 FOR PROPERTY INVESTMENT?

December 2015

London has traditionally been one of the world’s most popular markets for real estate investment and continues to be so. However, with advancing price growth in the British capital, some investors are deciding to place their capital elsewhere in search for lower entry points and higher yields.

At a discussion held in Dubai in November, London’s leading luxury residential property developer Northacre, supported London’s position as the top global city for property investment for the next 15 years. Northacre noted that London-based consultants Arcadis anticipate more than GBP 620 billion to be invested in commercial and residential property and infrastructure in London over the next 15 years – more than any other major city in the world. As London consistently outperforms its European and global competitors within today’s financial markets, the city will continue to expand exponentially. 700,000 new homes and 70 million sq ft of new office space will be built to cater for 460,000 new jobs that forecasters say will be created in the capital by 2030.

Having created more than 700 luxury homes over the last 25 years, Northacre’s properties are regarded as some of the most impressive and innovative residential developments in London. Northacre is 69 percent owned by the Abu Dhabi Financial Group (ADFG); at the recent event in Dubai,  Niccolò Barattieri di san Pietro, CEO of Northacre and Jassim Alseddiqi, CEO of Abu Dhabi Financial Group, spoke to media about why London is still the world’s best real estate opportunity.

In light of the changes to the UK tax system and changes in government policy towards foreign ownership, how do you keep the UK attractive to investors?

Niccolò Barattieri di san Pietro: “I think London is simply getting more aligned with other major cities in the world. Stamp duty has gone up from 7 to 15 percent, however people still buy in London which shows that this goes far deeper than the short term conditions. People are buying for the long term and temporary bumps in the road will not prevent them from doing so. We mitigate risk by creating a scarcity value, by making sure that our apartments are better than anyone else’s. Even currency exchange rates don’t really come into play here because the reasons why people by in London don’t come to a near equation of how much the pound is worth against other currencies.”

What is the development risk like in London at the moment?

Jassim Alseddiqi: “There is a big difference between acquiring a readymade asset and developing an asset. Developing an asset comes with a set of risks such as the planning risk, execution risk, budget risk etc. This translates into the developer’s return. ADFG have historically been acquiring ready assets but we now wanted to take the development risk and reap the higher returns that come with it. We needed a platform for this and there was no better place to do this for us than central London.”

Why do you expect significant interest from the Middle East for properties such as No. 1 Palace Street?

Niccolò Barattieri di san Pietro: “Middle Eastern investors are the forefathers of buying high-end residential property in London and have been there for 40 years. With regards to No. 1 Palace Street for example, we have started the selling process in April and have already sold 40 percent of the apartments.

Apart from a significant number Middle Eastern buyers we’ve had purchases from Africa, Russia, Hong Kong and British buyers of course. It’s important to note that we haven’t embarked on any major marketing campaigns and most deals were a consequence of word of mouth – ergo we’ve sold to people who know the Northacre brand.

At Northacre we attract a sophisticated type, the one that has been around for a long time and who is attracted by unique craftsmanship and authenticity, by the bespoke. However, buyer profiles are shifting. Last year, Russians accounted for 30 percent of transactions of over 5 million pounds and this year will probably be down to 20 percent. On the other hand, interest from Africa is rising; whilst two years ago African buyers accounted for 5 percent of the market, they now account for 15 percent of buyers.

Given that prime residential prices are rising and investors are looking at other markets, why would you say London is still the No. 1 market for property investment?

Niccolò Barattieri di san Pietro: “People come to London because it is a liberal and tolerant society, a vibrant cultural mix, and because it marries the old and the new like no other city in the world.

You have incredible history while at the same time you have an outstandingly creative industry like nowhere else in Europe. London is very progressive and there are so many opportunities for young people to do well. Based on this I believe London will continue to stay in the spotlight for property investors for quite some time to come.

No.1 Palace Street

Northacre’s latest development offers a rare opportunity to live opposite Buckingham Palace with unique views over Buckingham Palace Gardens; the only property in London with such a claim. Set on a 300,000 sq ft island site, the residence is located at the centre of St. James’ Park and will house more than 10,000 sq ft of lifestyle facilities including a 6,500 sq ft ‘haven of wellbeing.’ The development offers 72 apartments ranging from 1-bedroom to penthouse apartments with prices climbing up to GBP 6,000 per square foot. An apartment was recently sold for GBP 20 million (USD 30 million).

With developments such as No. 1 Palace Street, Northacre says it aims to revive buildings back to their former glory whilst giving people the opportunity to buying a ‘slice of London.’ The property will be completed in 2018.

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