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Posted by eduard on February 26, 2020
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Arab real estate investment in the UK post-BREXIT

Where is it headed as the Pound continues to sink?

Be it property, land or any other type of real estate, many argue that investment in this sector in the UK has been affected in one way or another since the Kingdom chose to leave the EU in 2016. A ‘’bright’’ side to Brexit uncertainty in the UK, specifically for foreign investors has largely been identified to be the decline in the Pound’s value. Which in real estate at least, was interpreted by experts as an opportunity for foreign investors to buy real estate property in the UK now, at exceptionally low prices regardless of any risks. Real estate properties can range from buy-to-let, land and even care homes which emerged as a viable business that the UK market needs at the moment to properly cover the needs of its elderly. The premise of this ‘‘exceptional opportunity’’ is that the Pound will make a comeback and rise to higher ranges, and that would make the profits of those who bought at lower prices not only high, but exceptionally high, because of the exceptional circumstance that is Brexit. However, what does Brexit mean to Arab investors, one of the biggest investors in the UK? Those who invested in real estate property and even land.

Weak Pound or strong, Brexit or not, Arab investors have a prominent presence in the UK

First, it would be relevant to take a look at the history of the Pound’s value in the past few years. Looking at the history of Sterling’s value, it is clear that it has shown a consistent decline since the announcement of Brexit vote result in 2016. However, there is consensus among experts that that doesn’t necessarily mean Sterling has declined permanently. The ultimate rise, further decline or stability of the Pound post-Brexit depends on economic growth inside the country as well as on its central bank’s monetary policy, concludes an analysis from fxcm.com, a leading provider of online foreign exchange and trading-related services. Economic growth though, is multifaceted and in turn depends on multiple factors. One of the factors is investing and international trade. And, as a former European Union member, the United Kingdom’s ability to negotiate trade deals with other countries outside the union was restricted by the very membership in the Union. As a member, trade deals and decisions are made collectively and are subject to votes and consensus, a constraint that will not be there when the UK effectively breaks away from the EU. That, would mean more autonomy, flexibility, agility and therefore relative effectiveness when it comes to building trade relations with countries throughout the world, as the same analysis predicts, and news confirms. UK government bodies as well as private entities can be seen stepping on the international stage and promoting investment and business opportunities with many countries in a wide range of fields. Most recently, on July 5th 2019, the Arab British Chamber of Commerce held a conference in London under the theme: Brexit opportunities. It is no irony that Brexit is seen as an opportunity around which bilateral and multilateral summits are held, and Arab investors and officials on their part see that with clarity. “Britain is on the verge of a crucial turning point in its relationships with the rest of the world”, declared Arab League Secretary-General Ahmed Aboul Gheit. He added: “The Arab world has a combined gross domestic product (GDP) exceeding $2.5 trillion annually. It has great economic power, wants sustainable investments in Britain, and sustainable British investments in its own countries”. On his part, the President of the Union of Arab Chambers, a Saudi official, said that commercial activities would expand between his country and the UK if the United Kingdom leaves the EU. It is also clear that the UK is acting proactively by reaching out to investors internationally, and particularly those historically close and with whom it has strong investment and economic ties, the Gulf states and Middle Eastern companies in energy, consumer products and real estate. ‘’The UK seeks post-Brexit free trade agreement with GCC’’, a British minister declared to the press earlier this year.

Arab real estate investment in the UK. No sign of slowing down

Arab real estate investment in the UK has shown no sign of slowing down in the last years despite all concerns around Brexit. The focus has clearly been on taking advantage of the weak Pound, and a justified confidence that Brexit will not shake London’s standing in particular, as a top investment destination. This is what an Arabian Business article concluded after taking a close look at the Middle East’s Ultra High Net Worth investors in particular, and their investment choices in real estate properties. ‘’Middle East Ultra High Net Worth investors (UHNWIs) poured $3.3bn into London’s real estate market in 2018, according to a Knight Frank report’’, says the article. And, the writing provides compelling data that predicts the same pattern for the upcoming years.

One example is Emirati real estate giant DAMAC Properties. The real estate company has a strong presence in the UK, and the financial commitments that tie it to multiple interests there, have been reported on closely by the media in the

last few months. Damac founder‘s plans to inject billions into the London real estate earlier this year was a story that made the headlines. And, Damac Tower, the luxury London tower built by the Emirati company and fashion brand Versace, is making the headlines more recently as well. ‘’Over half the units in Damac Tower in London sold’’, reveals a headline from Arabian Business last May.

As most of the coverage on the topic concludes, Arab real estate and property investment in the UK will only increase post-Brexit, like other types of real estate and that, perhaps surprisingly, includes land and ‘’not so common’’ areas of real estate investment such as student property. The Pound’s decrease in value is seen as an opportunity to buy cheaper than before. And, there are enough reasons to make the prediction that the Pound will bounce back to higher ranges, the likely scenario.

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