DOORS OPENED TO UAE INVESTMENT IN UK PROPERTY MARKET
The results of the UK general election have put the country on a sustainable path of growth and economic stability which is set to help the UK housing market gain considerable momentum in the coming years. As property prices decline in London, however, and rise in the rest of the UK, the slowdown in market activity is paving the way for lower mortgage rates and attracting more foreign investment as a result, particularly among UAE nationals and expatriates.
Current property market trends in the UK combined with the recent decline in Middle East oil prices have increased the appetite for UAE investment in the UK property market from high-end investors looking to diversify their portfolios. Moreover, rising rents in the UK are attracting UAE residents to invest in low-cost buy to let investment properties in England and Wales. A large percentage of these UAE residents are UK expats looking for alternative investment options in light of the recent volatility in the Dubai property market.
Ever since Emiratis were granted visa-free access to the UK, cross-border property ownership has been expected to skyrocket. The devaluation of the euro has played a key role in increasing demand across the EU property market and dirham buyers as well as other GCC-based buyers with currencies pegged to the US dollar, are now wealthier and in a better financial position to invest.
Before the financial crisis, it was easier for UAE residents to obtain mortgages on UK property.
Following the crunch, many lenders either stopped offering mortgages or tightened lending restrictions.
Although UK expats and other overseas residents are eligible to apply for mortgages in the UK, many lenders will only accept applications from UK passport holders or from those who work for international companies. As expats cannot provide lenders with UK credit score information, they also have to put down more than 20 per cent of the property value and deal with higher interest rates and heavier paperwork.
As such, the growing demand for UK property investment among UAE residents, coupled with the challenges of securing a mortgage in the UK for overseas investors, is prompting lenders to bring new solutions to the market.
With UK rent and property prices set to rise in the near future, now is without doubt the right time for UAE residents to consider investing in the UK property market.
The UK Land Registry reported that housing prices in England and Wales increased earlier in 2015, with expectations for further increases in the months ahead, whilst research from Homelet, a British property management agency, has shown that rent prices in the UK rose by 10 per cent in the first quarter of 2015.
Furthermore, according to the real estate investment management firm, CBRE Global Investors, the prices of properties and houses in London are expected to increase by 30 per cent over the next five years.
Buyers from the UAE accounted for more than 18 per cent of UK property sales to overseas investors earlier this year, and we only expect this figure to grow further as residents continue to take advantage of the lucrative rental yields and capital growth that the market has to offer.
SOURCE – The National, UAE
SSGA LAUNCHES CONTINENTAL EUROPEAN REAL ESTATE ETF
State Street Global Advisors, the asset manager behind the SPDR exchange-traded fund (ETF) range, has announced the launch of the SPDR FTSE EPRA Europe ex UK Real Estate UCITS ETF (ZPRP).
The fund tracks the FTSE EPRA/NAREIT Developed Europe ex UK Index offering exposure to listed real estate companies and real estate investment trusts (REITs) in Europe but excluding the UK whose relevant activities are defined as the ownership, disposal and development of income-producing real estate.
In contrast to direct property investing, which can involve significant capital outlays, hefty acquisition costs and long tie-up periods, the ETF offers investors a liquid, diversified and low-cost means of accessing property. And the fund’s diverse regional and property exposures, coupled with an attractive dividend yield (the index currently yields 3.42%), position this fund as useful tool for looking to add a degree of real estate and an alternative source of income to their portfolios.
The fund currently offers exposure to France (34.5%), Germany (26.4%), Sweden (10.1%), Switzerland (8.3%) and Spain (4.9%). The fund is listed on the London Stock Exchange and Deutsche Borse’s Xetra platform. It has a total expense ratio of 0.3% per annum.
“With extensive quantitative easing still in place in Europe, many investors are turning to the steady income, potential for inflation protection, and diversification that an investment in real estate can offer,” commented Alexis Marinof, head of SPDR ETFs EMEA.
Sudir Raju, managing director, ETP Relationships at FTSE Russell, added: “As investors continue to diversify their exposure to high yielding asset classes, listed real estate remains an attractive source of income. The FTSE EPRA/NAREIT indexes are seen as the standard industry benchmarks and act as a clear proxy for the direct real estate market. We are delighted to license the FTSE EPRA/NAREIT Developed Europe ex UK Index to SSGA as the underlying benchmark for its new European ETF.”
The fund builds on SSGA’s existing real estate offering, which includes the SPDR Dow Jones Global Real Estate UCITS ETF.
For investors seeking a greater focus on income, the iShares European Property Yield UCITS ETF (IPRP) could be a more relevant option. Thus fund tracks the performance of the FTSE EPRA/NAREIT Developed Europe ex UK Dividend+ Index.
For broader European coverage including the large UK property market investors could consider the iShares Stoxx Europe 600 Real Estate UCITS ETF (EXI5), which tracks the STOXX Europe 600 Real Estate Index.
SOURCE –John Maher, CFA; ETF Strategy, UK.