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UAE investors account for 20% of UK buy-to-let sales in 2015

UAE investors account for 20% of UK buy-to-let sales in 2015

June 2016

Chestertons MENA is expanding its UK property investment reach beyond the traditional London M25 boundary, with the launch of a number of new prime developments in the key gateway cities of Manchester and Birmingham due to strong economic growth, large student populations and major government transport infrastructure investment.

“In the current market rental yields in some central London zones are as low as 3-4% but still with a healthy capital appreciation whereas Birmingham & Manchester offer yields of 6-7% and a slightly higher capital appreciation, at a more affordable price point, therefore appealing to a larger bandwidth of investors,” said Amit Seth, Head of International Residential Development, Chestertons, MENA.

A core city of the northern powerhouse proposal, Manchester is already home to a thriving residential community that has grown to over 500,000 in the last decade with a further 2.25 million living in the suburbs. With four universities, plus another 14 universities and higher education institutions in surrounding areas, 350,000 students live within an hour’s drive of Manchester, Europe’s largest student population.

Economic growth has also been boosted by major public investment into transportation infrastructure development, including the expansion of the existing Metrolink tram system and the completion of the AED 175 billion HS2 rail link which will cut the journey time to London in half, to just over one hour.

“Manchester is a city known to many GCC investors, thanks to Abu Dhabi United Group-owned EPL football team Manchester City. Institutional investors such as Abu Dhabi Investment Authority (ADIA) have invested heavily into the UK, giving increasing comfort to investors from the GCC region. To put this into perspective, the UAE alone accounted for over 20% of buy-to-let sales in the UK in 2015, USD 1.99 billion of investment in the last quarter of 2014,” said Seth.

It is also home to the UK’s third largest airport, where plans have been approved to expand the existing Airport City Enterprise Zone and add a new 2.8-million-square-foot Life Sciences Enterprise Zone to further catalyse new business opportunities.

Named the number one western European city to invest in by the World’s Most Competitive Cities Report 2015, Birmingham was also ranked as the UK’s most investable city in Urban Land Institute (ULI) and PwC’s 2016 Emerging Trends in Real Estate Europe 2016: Beyond the Capital report.

Birmingham is the UK’s second city with a population of over 1.1 million people, with a total metropolitan population of 2.4 million and GDP of over USD 90 billion. It is home to six universities making it the largest centre of higher education in the UK outside London.

According to Chestertons most recent residential market research report and studies by investment management firm, Hermes, the city is expected to enjoy a period of sustained rental uplift going forward as the growth drivers of the past decade are set to continue.

Overall average sales prices in Birmingham are now 14.2% above the market low point of November 2012 with annual growth price to January 2016, 5.7% ahead of the West Midlands average of 4.5%.

“Future growth will be supported by public initiatives such as the 20-year Big City Plan, which is designed to redevelop the city centre aiming to make Birmingham one of the most liveable cities in the world within 20 years. The project should create an estimated 50,000 new jobs and the current lag in residential real estate supply should also trigger further capital and rental value growth, which augurs well for prospective investors who can expect average rental yields of 6.2% and 6% respectively for a one or two-bedroom apartment,” noted Seth.

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