Standing in what will be a multimillion pound apartment on the thirtieth story of CIT’s new South Bank Tower scheme in London, it is hard not to admire the view.
To the east is St Paul’s Cathedral and the City, to the west Big Ben and Westminster; you cannot get more central than this.
A joint venture of the private developer CIT and the Saudi investment bank Jadwa Investment, bought the site, the former King’s Reach Tower office block, out of administration at the height of the global financial crisis in 2010 and hopes to make a killing out of redeveloping it as luxury flats, many of which are aimed at rich Middle Eastern buyers.
But with sharp falls in house prices reported in the capital in June, some analysts are already starting to call the top of the market as the average price of a London home approaches the half-a-million-pound barrier. Rightmove, the UK property website, said some of the biggest declines were recorded in the capital, with the largest drops in Kensington and Chelsea, traditionally favoured by Arab investors, where asking prices fell more than 7 per cent this month.
But central London developers are hoping that the safe-haven appeal of city will trump pricing concerns – at least for Middle Eastern buyers.
“Every time there has been economic or political upheaval in the Middle East – the oil-price hike of the 1970s, the fall of the Shah of Iran and the recent Arab Spring – it has generated a new wave of Middle East purchasers and investors into Mayfair and the wider West End. Prime Central London is viewed as an island of stability and a second home,” said Peter Wetherell, the chief executive of Wetherell.
The new South Bank Tower is one of the many new luxury developments in the city that has buyers from the region in its sights.
“We have had a lot of interest from Middle Eastern buyers,” said George Kyriacou, the managing director for developments at CIT. “With our connections in Saudi we have presold about 50 of the 191 apartments to Middle Eastern buyers.”
In total CIT has sold 137 of the 191 planned apartments in the new 41-storey tower to investors from around the globe who have been attracted by facilities, including what is touted to be the largest private roof garden in central London.
The hairdresser Giuseppe Mascolo, the Tony out of Tony & Guy, is among those rumoured to have bought in the scheme, and the comedian Graham Norton is understood to have had a viewing.
The developer plans to have a sales launch in September aimed at the UK market but is heavily targeting rich Arabian Gulf investors in its marketing for the remaining larger units, which include a 4,400-square-foot penthouse that it hopes will fetch more than £16m (Dh97.84m).
And CIT Tower is far from alone. Along the South Bank are dozens of cranes working away on posh London apartment complexes.
According to the property agent CBRE, 27 new tower blocks of multi-million-pound flats are being built on London’s South Bank complete with gyms, swimming pools and breathtaking views of the city, a large chunk of which are aimed at Middle Eastern Investors.
The agent predicts that over the next decade about 16,300 new homes are set to be built along the south bank of the River Thames between London Bridge and Chelsea Bridge, of which they expect at least ten per cent to go to Middle Eastern investors.
At the same time Qatari Diar, which is working on plans to redevelop the iconic Shell Centre as a mixed-use scheme including 877 homes, is likely to aim for an even higher proportion of Middle Eastern buyers.
“Five years ago the Middle Eastern investors that we were dealing with only wanted to buy homes that were located in the golden postcodes of Knightsbridge, Mayfair, Belgravia, Kensington and Chelsea,” said Rory Cramer, the senior director for central London residential at CBRE.
“But what we are seeing now is that next generation who went to university in the UK and are used to living in high-rise apartments, whereas their parents lived in villas. They don’t want to stay in Dad’s house in Belgravia. They want to live in their own apartments in trendier parts of town with better access to facilities and great views,” he added.
Certainly Middle Eastern investment in the London property market has rocketed in recent years. The estate agent Wetherell estimates that Gulf buyers account for 10 per cent of property purchases in Mayfair each year and about half of all buyers for properties worth more than £10m.
But with a strengthening pound, rising property prices and the looming threat of the UK government introducing a mansion tax, some analysts are starting to warn that Middle Eastern investors could be put off investing just as a glut of swanky new London flats hits the market.
“The market does face some short-term challenges, which mean that growth is expected to slow across the prime London market over the next 18 months,” said Lucian Cook, the head of residential research at Savills.
Nevertheless, property experts are bullish that the Middle Eastern buying frenzy will continue.
“There are at least eight reasons why Middle Eastern investors are buying in London,” said Mr Cramer. “Favourable currency exchange rates is only one of those reasons. The others remain things such as a good education system, a transparent tax and legal system, a favourable time zone, cultural attractions and the fact that the UK is still viewed as a safe haven for cash. All of these mean that Middle Eastern buyers will continue to be net investors in London.”
Back at CIT’s new tower, George Kyriacou is unperturbed. “Middle Eastern and other overseas investors are very important in the early stages of a project when you are trying to get sales off the ground. But in fact the majority of our sales have been to UK buyers,” he says.
“London has always been a major draw to buyers from all over the world because it is such a major world city and everyone wants to own a part of that. I can’t see that ending any time soon,” he said.
lbarnard@thenational.ae