Britain's red list travel rule stops buyers from committing to sales, experts say
When the busy skies between the Arabian Gulf and London open up, property agents and developers are hoping to cash in on soaring demand from Gulf buyers for luxury homes in London.
The market is poised for a surge in transactions with GCC buyers after developers ramped up their marketing campaigns to the region in the run-up to Britain easing its travel restrictions.
However, Britain’s traffic light system – with green, amber and red sets of categories governing travel into the country – placed the UAE and other Gulf countries on the red list, which stipulates that passengers arriving from those countries must quarantine in a hotel for 10 days.
Stan Ennor-Glynn, head of international residential sales Middle East at property consultancy Savills, said the news was a blow for the market, which was expecting a summer of unleashed pent-up demand following a year of restrictions.
“A month ago, we thought flights were going to open up, everyone would be able to travel to the UK and we were going to have a real run of deals,” Mr Ennor-Glynn told The National.
“There's so much pent-up demand in the Middle East and the fact that people haven't been able to travel has had a real impact on the amount of deals we've been able to do. We won’t see the run we were expecting until everything opens up.”
Savills is running seven marketing campaigns for prime central London developers in the Gulf region, which has boosted interest in the UK capital – already popular with Middle East buyers.
While the appetite is there, Mr Ennor-Glynn said “the urgency is not”, with buyers unwilling to commit until they can travel.
“There's a huge amount of interest but until people actually get on planes, and go and view, feel and touch the product, I don't really think we're going to be seeing as many transactions as we'd like.”
Despite the hesitancy among Gulf buyers, the super-wealthy spent more on luxury homes in London last year than in any other city across the globe, according to April data from property consultancy Knight Frank.
International buyers spent almost $4 billion on super-prime properties in the UK capital in 2020, with London's most expensive penthouse at Knightsbridge's One Hyde Park, recently placed on the market by British property mogul Nick Candy for £175 million ($246.16m).
“They're just not going to transact on the bigger deals,” he said. “We've seen a lot of leads being generated, particularly from Saudi, but in terms of being able to convert them it's been slightly tricky, because it's very hard to get someone to come in out of a brochure or a Zoom [meeting].”
The Gulf region is slightly different from other parts of the world, Mr Ennor-Glynn said, because it takes time to build up trust before buyers commit to a transaction – a relationship normally forged through face-to-face meetings.
“It’s very hard to on-board clients just doing Zoom,” he said. “We normally go on planes on a weekly basis, travelling around the region, having face-to-face meetings with people all over the GCC. And we'd have to do that on a number of occasions before we actually get them to commit.”
The sales team at Battersea Power Station, one of London’s premier developments, has noticed a similar pattern. While Phase 1 of the development is now complete with more than 1,500 people living there, the second phase, which is 60 per cent sold, is welcoming its first residents this month.
Despite lockdown restrictions, Battersea Power Station has achieved more than £150 million in residential sales in the last 12 months, with 50 per cent sold to international buyers, said Meriam Lock-Necrews, head of residential at Battersea Power Station.
However, while there has been a massive ramp up in enquiries from Gulf buyers, partly thanks to company’s latest marketing campaign in the region, the interest is not being matched by completed deals.
“With international travel being restricted over the last 12 months, we've seen a drop in the international market and those higher value apartments that people typically want to view before they commit,” Ms Lock-Necrews told The National.
Middle Eastern buyers, in particular, prefer viewing completed products, she said, and with the development due to complete soon, buyers are willing to wait to be able to fly in and view.
“It’s important we are on their radar and if travel restrictions ease we want to be well-positioned to capture that interest in the next quarter or two quarters,” Ms Lock-Necrews said.
“There are people who have invested in Phase 1, but they like to buy multiple apartments to house the family within the same development, especially if they're coming to visit over the summer months."
With the development’s dedicated tube station opening this autumn, tech giant Apple set to open its 500,000-square-foot office over six floors in the Power Station next year and retail units expected to complete by the fourth quarter, Ms Lock-Necrews said it is an attractive investment option for Middle East buyers.
“Middle East buyers always want a return on their investment. Having the tube station opening this autumn has solidified that and the retail is something that they're accustomed to as well," she said.
"I've been to Dubai many times and they are used to living in developments that have retail and restaurants downstairs. In London, there hasn't been enough supply of that. When I first came to Battersea Power Station it reminded me of parts of JBR (Jumeirah Beach Residence) where you get that community buzz.”
With prices for homes in the Power Station ranging from £865,000 for a studio to £1.8m for a two-bed, Ms Lock-Necrews said securing deals remotely has been a challenge.
“We've had preliminary conversations and they're certainly narrowed down to specific units, but they would like to visit first,” she said.
Mr Ennor-Glynn said Savills has more success selling lower-priced properties, with buyers from Kuwait snapping up homes starting from £500,000.
“People seem more willing to commit at that level of the market," he said.
Kuwait is the second most active market for Savills, behind Saudi Arabia, which accounts for 60 per cent of the leads generated from the company's recent marketing campaigns, while the UAE comes in third.
“For other countries across the region, it's fairly quiet – it's just a sign of the times,” Mr Ennor-Glynn said.
One luxury developer with a solution for the lack of international footfall in the UK capital is Paul Eden, founder of luxury property developer Regal London.
Mr Eden is on a tour of the GCC, marketing the remaining 20 per cent of his latest luxurious development One St John’s Wood, where prices start at £995,000.
He decided to get around the problem of buyers unwilling to commit by recreating a 1,200-square-foot penthouse apartment at the company’s Downtown Dubai office.
“I flew everything out and fitted it out. It’s not an exact example but the finishes are the same and it shows someone what they are getting. The buyers in this region say it’s the first time it’s ever been done,” Mr Eden said.
“You physically walk through a front door, you can touch your kitchen and physically walk into the bedroom and go into a bathroom – you can touch and feel everything.”
With the development set for completion in October 2022, Mr Eden’s latest push is the penthouse apartments on the market for £7m-£8m, which he considers perfectly suited to Middle East clients because their larger size can house an extended family.
“We’re building a six-star hotel that has the most incredible facilities: valet parking, a business lounge, club lounge, private dining room, cinema room, its own spa, treatment rooms, a 20-metre indoor swimming pool with jacuzzi, his and hers' hot tubs and sauna and steam room,” he said.
“From the penthouse levels you can look directly into Lord's Cricket Ground.”
Mr Eden is confident he will sell the rest of his building, despite the travel restrictions, because of the Middle East’s enduring love affair with the UK capital’s property market.
“The Middle East market loves London because it is secure and very safe for them to place their money. Everyone I’ve met over the past few weeks has missed London terribly and they are desperate to get back on a plane and come across,” he said.
Despite the hurdle of travel restrictions, Mr Ennor-Glynn said the outlook for the capital’s property market is extremely positive.
“Prices in prime central London remain 20 per cent below the 2014 Peak and 40 per cent below if you're a dollar-pegged investor,” he said.
Savills expects 21.6 per cent growth over the next five years for prime central London property – with 3 per cent growth this year and 7 per cent next year.
This ties in with the wider market, which is booming thanks to an extended stamp duty holiday, with the average British house price reaching a record high of £258,204 in April – adding almost £20,000 to the value of a home since the market was closed by Covid-19 a year ago.
“That’s why people from this region realise it's a great time to buy for the medium to long term. It's probably the best buying time for the last 10 years in central London now. We're through a lot of the Brexit headwinds and we're hopefully coming out on the other side of the pandemic," he said.
“London still remains fairly favourable in terms of cost of acquisition compared to other cities around the world and if flights open up, it could get very, very busy.”