Historically the Middle East has been based upon oil which has created income streams in the billions of dollars. The situation has changed over the last few years with the oil price now under severe pressure and the political arena seemingly changing on a daily basis. As a consequence it seems as though Middle East investors are now looking to spread their risk and geographical exposure.
Middle East outflows continue to rise
Global property expert CBRE recently issued a report highlighting the fact that 2014 saw $14 billion invested in overseas property markets by Middle East investors. This is a phenomenal increase over recent times and while investment is expected to plateau around $15 billion per annum in the short term there is certainly scope for further increases in the future. After years of depending upon “black gold” it seems that many Middle East investors now are now looking to the future with a long-term strategy in mind.
It will be interesting to see how the situation develops in the short, medium and longer term and indeed whether, as some experts have predicted, the heydays of oil at in excess of $100 per barrel have long gone.
Where is the money going to?
In general terms the current investment coming out of the Middle East is evenly split between the Americas and Europe. On a citywide level London continues to dominate with 32% of Middle East investment finding its way into the UK capital (although this is down from 45% in 2013). Paris is second place with 15.8% and New York comes in at 9.6%.
It will come as no surprise to learn that London is still the top destination for Middle East property investment although a reduced share from 45% in 2013 down to 32% in 2014 is significant. Some experts believe that there will be further diversification at the expense of cities such as London although this remains to be seen. London is continually talked down by property experts although it always bounces back!
First there was Russia, then China and now the Middle East?
Only a few years ago it was Russian money which was seemingly supporting the worldwide property market as rich Russian investors looked to diversify their portfolios. The last couple of years have seen a massive influence from both the Chinese government, directly and indirectly, and individual Chinese investors looking to invest in the global property market. Whether or not the Middle East will have as much influence in the short, medium and longer term remains to be seen but an average investment of $15 billion per annum should not be taken lightly.
It is also interesting to see that Europe and America are attracting the interest of Middle East investors in equal measures. The UK seems to be attracting more than its fair share which is perhaps understandable when you bear in mind the currency issues, and economic frailties, of the European Union. The worldwide property market is certainly a very liquid and very fast-moving animal with a new group of investors seemingly waiting on the sidelines as former favourites fall by the wayside.