Gulf investment in northern England real estate is rising, and Middle Eastern ownership of British soccer clubs is helping to drive it, according to Andrew Ball, chief executive officer of the Bank of London and The Middle East (BLME).
The London-headquartered BLME is one of the largest Islamic banks based in Europe, and the lender focuses on savings, wealth management and real estate investments. Around half of the bank's £750 million ($894 million) real estate portfolio in the UK is within Greater London, with the remainder outside.
In an interview with Al-Monitor, Ball said that five or six years ago London was nearly the sole British investment location for the lender’s Middle Eastern clients, but that has since changed as investors look for higher returns on property.
London has long been considered a “safe haven” investment in real estate due to the stability of the city’s property market, while regions in the north often provide higher returns on investment.
“Because of return profiles, and in general, the sophistication level of clients, we are seeing a lot of real estate investment in the [northern] regions,” Ball said.
“One, because the clients see it as a better return, but secondly, where we get very sophisticated clients, they are actually doing the development themselves, so there's a lot of partnering with UK developers.”
The bank has seen investment in property in Northern England almost double in two years, from £67 million ($80 million) in March 2021 to £110 million ($132 million) today.
Ball said that popular investment destinations over the last couple of years include Manchester, Liverpool and Leeds.
Gulf countries are greatly investing in British soccer clubs, and that is likely helping drive property investment in northern English cities, Ball said. The Saudi Public Investment Fund bought an 80% stake in Newcastle United in October 2021, while Sheikh Mansour bin Zayed Al Nahyan's Abu Dhabi United Group took over Manchester City in September 2008. Qatari and Saudi investors are reportedly interested in purchasing Manchester United from the Glazer family.
“We're seeing a lot of activity up in the northeast, probably in line with the [Saudi] Public Investment Fund investment in Newcastle United, so that's a very active market for us,” Ball added.
Ball said that student accommodations as well as co-living and co-working spaces are popular with investors from Gulf countries.
He said much of the focus was on residential development, as it is seen as a safe medium- to long-term investment given the uncertainties in the UK economy.
Over the last six months, Britain has had three prime ministers, seen the value of the pound tank (before recovering), and has been predicted by the International Monetary Fund to be the only major world economy to fall into recession this year. High-interest rates are also making some investments less attractive, Ball said.
Despite the recent political and economic turmoil in the UK, Ball said that there is still “a lot of continued interest” in the country from Gulf investors and believed that was set to continue.
The weakness of the sterling against the dollar is helping to drive this, he said. Ball added that it was also because of many students from Gulf countries were studying at British universities and there being mature legal and financial systems in the UK, which has more Sharia-compliant banks than any other Western country.
“Where clients would buy [property] quicker in the UK pre-COVID, [now] they're sort of being a lot more selective in terms of what they're looking for — longevity and long-term yields, but there’s certainly no shortage of appetite,” Ball said.
Most of the investment BLME is seeing from the region is from Saudi Arabia but also Kuwait due to the bank being partially owned by Kuwait City-based Boubyan Bank.
Ball said there was lots of wealth creation in the kingdom. “What we see is perhaps somebody might buy a buy-to-let property and an off-plan residential apartment block with a good income and take that as the first step, and then build up their portfolios here [in the UK].”
BLME has also seen investment from Qatar, Bahrain and to a lesser extent the UAE due to the strong representation of Emirati banks in London.
Last July, BLME released research showing that the COVID-19 pandemic restrictions had little effect on real estate investment from Gulf countries into the UK.
In January, Arabian Business reported that more Gulf country investors preferred to pool funds for investments in London real estate via syndicates.
Correction: March 13, 2023. An earlier version of this article stated that BLME was the largest Islamic bank in Europe. Rather, it is one of the largest.