The upscale real estate market in London, England, is experiencing a long-term recession, while wealthy individuals from the United Arab Emirates (UAE) are actively purchasing properties. With housing prices reaching their lowest point in 10 years and new tax benefits being introduced, it appears to attract the interest of the wealthy.
According to the Financial Times (FT), the London luxury dwelling market has been declining for the past 10 years due to factors such as increased uncertainty following Brexit (Britain's exit from the European Union), rising property taxes, and the aftermath of the abolishment of the 'non-domicile taxation system.' In areas densely populated with luxury dwellings, such as Kensington and Chelsea, as of May, house prices have dropped to their lowest level since 2013.
The non-domicile taxation system is a policy that does not tax non-residents (Non-Doms) who live in the UK but legally have their permanent residence abroad, as long as they do not bring income earned abroad into the UK.
Chancellor of the Exchequer Rachel Reeves abolished this system in her first budget last October, while also exempting high-income foreigners and citizens who returned after residing abroad for over 10 years from foreign income and capital gains tax (FIG) for four years, stimulating external investors' interest.
The London real estate industry is reportedly having the busiest summer in three years. Becky Patemi, an executive at Sotheby's International, stated, 'Typically, summer is a slow season for the industry,' adding that 'properties that have not been available until now are coming onto the market due to recent price adjustments, leading to increased transactions.'
This is interpreted as many British expatriates living in the Middle East considering returning home due to tax benefits, stimulating the market. James Forbes, co-CEO of property consultancy Forbes Gilbert Green, emphasized, 'Interest from investors residing in the Middle East has noticeably increased over the past 3 to 4 months,' noting, 'They believe it is the right time to purchase properties at low prices.'
Local real estate agencies in London reported an increasing number of cases of British citizens returning home, citing education and living infrastructure as reasons. Patemi stated, 'As the school holiday schedules of UAE schools have been standardized, it has become easier for families to spend time in the UK,' adding that 'some families are planning to live between the UAE and Europe.'
Moreover, the rapid increase in real estate prices within the UAE appears to have an impact. According to data analysis firm Redin, real estate prices in Dubai have risen by an average of 67% since 2019, with particularly sharp increases noted in luxury dwelling prices.
It appears that some investors are realizing profits from real estate transactions in the Middle East and redirecting their funds to London. According to property consulting firm Knight Frank, as of July this year, the proportion of foreign buyers purchasing luxury dwellings in central London who are nationals of the UAE was 3%, a fivefold increase compared to the same period last year (0.6%).
Investments are also expanding beyond residential to commercial real estate. Knight Frank reported that Middle Eastern family offices and individual investors invested £245 million (approximately 460.4 billion won) in UK commercial real estate this year, ten times the annual investment amount from the previous year (£25 million).
The UK Treasury has stated that concerns over substantial capital outflows due to the abolishment of the tax exemption system for non-residents are exaggerated. Minister Reeves remarked, 'The new tax system is simpler and more attractive than before,' noting that 'the number of asset owners considering relocating to London is increasing.'
Stewart Bailey, a department head at Knight Frank, also remarked, 'If someone from the UAE has not yet purchased a home in London, the suppressed property prices and the newly established tax exemptions will be significant advantages.' He added, 'While the departure of existing non-residents is a setback for the government's revenue collection, new buyers will find it more advantageous as competition decreases.'