Brexit unlikely to have much effect on Middle East markets, say industry figures

undefinedundefinedFears over the effect of the United Kingdom’s European Union referendum on the Middle East have been downplayed.

Last week, 52% of voters in the United Kingdom signalled their wish to leave the European Union.

But despite worries over Middle Eastern investors buying UK property, industry figures have said there is unlikely to be large-scale changes, at least over the short-term.  

“We have decided to continue our investments with the UK though we are monitoring the situation very closely,” said Masdar CEO Mohamed Al Ramahi.  

“However, we do not see any real impact on our business or partnership and major projects will continue.”

He also said that Europe in general remains a very attractive place to invest, especially in the areas of renewable energy and they (Masdar) will continue to invest.

He said there might be long-term impact in the future but that they will continue to monitor the situation, though both the UAE and Masdar are seeking to invest more in the GCC, especially with the Saudi Vision 2030 announced (as the kingdom will also focus on renewables).

Nonetheless, the UAE will always have an interest in Europe in general, Ramahi concluded.

Property firm Cluttons, which said Middle East investors could benefit from the United Kingdom’s decision to exit the European Union.

The deterioration in the value of sterling erased many gains in recent years, particularly buyers from the Gulf, whose currencies retain a fixed peg to the US dollar.

But Faisal Durrani, head of research at Cluttons commented: “Any US dollar or UAE dirham investors will find the price of an average prime Central London residential asset $96,000 (AED 350,000) less than it was on June 20.

“Conversely of course, the same property is now $96,000 cheaper for international buyers looking to enter the market.

“Gulf investors eyeing up a London residential asset will find it 31% cheaper than it was during the last market peak in Q3 2007, suggesting that we may be on the cusp of seeing a significant resumption in property investment activity in the British capital, mirroring the results of our recent Middle East Private Capital Survey, particularly as global investors seek out safe haven assets such as gold and London’s bricks and mortar, which we expect will retain its appeal.”

“The longer term implications are too early to assess, but we may start to see the unlocking of London’s stalled residential property market, with investors both exiting and entering the market as we head towards a period of demand volatility.”

Addressing the effect of the decision on the UK market, a spokesperson from Core, UAE Associate of Savills, said: “It is impossible to predict what will happen to the UK housing market with any great accuracy until we know what Brexit will mean for the wider economy.  

“What we do know from lead indicators, such as the RICS survey, is that uncertainty pre referendum impacted on new buyer enquires. A continuation of that uncertainty is likely to pull back price growth and transactions in the short term.

“The prospect of an increase in mortgage interest rates and a reduction in wage growth is expected to create greater affordability pressures over the medium term, particularly in London where borrowers have stretched themselves further.

“However, the precise impact depends on how severely these affordability drivers are affected.  

“An increase in effective interest rates will also have heightened relevance for mortgaged buy to let investors, given the progressive reduction in tax relief they will get on their mortgage payments in the future.

“The prime markets, that typically are more volatile, may well see a greater short term impact.  

“However, along the line, a fall in the value of sterling should bring some international buyers back into the market, albeit with potentially less gusto than in previous downturns given higher stamp duty costs.”

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