Middle Eastern buyers refocus on Europe's most valuable real estate

Please note: The external views expressed in this article are not the views of Barclays Private Bank, and forecasts are not a reliable indicator of future performance. Professional advice should always be sought when selling or buying property.

After months of pandemic-induced inactivity, Middle Eastern buyers are once again making moves in the international property market – snapping up some of Europe’s most valuable real estate.

Everywhere from prime central London to the exclusive neighbourhoods of Paris; right through to the picturesque retreats of the French Riviera, and the most sought-after ski chalets of the Swiss Alps.

According to Rahim Daya, Chief Executive of Barclays Private Bank in Switzerland and Head of the Middle East, it’s these prime property hotspots that have historically been the most desirable for clients in the region: “Middle Eastern buyers frustrated by the pandemic continue to drive up demand for properties across the UK, Switzerland, and France.”

The easing of COVID-19 travel restrictions last year has seen many buyers from the likes of the UAE and Saudi Arabia now returning to these luxury enclaves in ever greater numbers – buoyed also by rising oil prices, and a strengthened US dollar.

They are also re-entering local property markets where gravity-defying prices are quite often the norm – despite the backdrop of surging inflation, macroeconomic uncertainties, and geopolitical tension.

The end of Ramadan and the summer months – where temperatures in the Arabian Gulf can become extremely unpleasant – usually signal an ultra-high-net-worth exodus to Europe, and especially to London, which becomes a home-from-home for many wealthy Middle Easterners.

“This is the first summer in two years that families have been able to make their extended trips to Europe following the stringent COVID-19 travel restrictions,” adds Daya.

But it’s not just a holiday they want, many also come in search of a perfect property in a prime location. In the article below, we analyse the factors driving these top markets.

London – primed for recovery

While much of the UK has seen house prices surge to record highs during the pandemic, driven mainly by domestic buyers – prime central London has been on something of a different trajectory.

As we covered in our recent article, property prices in prime central London are still 15.6% off their August 2015 peak, according to the latest Knight Frank data¹. These traditional golden postcodes of the capital – where apartments tend to predominate – stretch from Chelsea to Camden, and Notting Hill to Westminster.

A combination of Brexit uncertainties, an escape to the country during COVID-19 lockdowns, as well as the international travel ban at the height of the pandemic, have all conspired to keep prices muted for several years in the capital’s high-end market.

However, there are signs today that London’s luxury property market is finally starting out on its long-overdue recovery path. A lack of supply, allied to robust demand – and the gradual return of international buyers – has seen prices in prime central London increase 2.4% in the last 12 months, according to Knight Frank¹.

“This recovery is only going to get more noticeable when international buyers start coming back in more meaningful numbers,” says Tom Bill, Head of UK Residential Research at Knight Frank.

As many as one in six homes bought in prime central London pre-COVID were purchased by Middle Eastern buyers². Aside from the mega mansions, lock-up-and-leave apartments are also highly sought-after options.

“The currency play and long-term safe-haven benefits of UK property will continue to underpin demand from Middle Eastern buyers, especially given what’s happened to oil prices,” says Lucian Cook, Head of Residential Research at Savills.

“And let’s not forget that prime central London, up until 2014, had an incredibly strong record of inflation plus house price growth. That combined with where prices sit now, makes it a particularly attractive investment proposition.”

Alex Christian, Director of Savills’ London Private Office, concurs: “In the current inflationary environment, no-one wants to be sitting on cash. Buying a property has always been a good hedge against inflation – especially with the low pound and the amount of wealth generated in the Middle East.”

Many wealthy Middle Easterners also look to set up home in the capital to give their children the best start in life, giving them easy access to some of the UK’s best public schools. It’s a topic we covered in our recent article entitled, “Moving to the UK: How to choose the right school for your child”.

French Riviera – prices heating up nicely

The sun-drenched French Riviera is known the world over for its seaside resorts, charming villages, and Mediterranean lifestyle. It’s also a hotspot for international property buyers – and it’s a market that’s beginning to sizzle.

According to Knight Frank’s Prime France Report 2022³, prime property prices on the French Riviera increased 5% in 2021.

The hottest Côte d’Azur properties have historically tended to be beside the seaside. But it’s inland areas – and the lure of larger homes with bigger gardens – where prices have risen fastest since the pandemic.

“We’ve seen some pretty stellar price growth in the French Riviera at the prime end of the market,” says Kate Everett-Allen, Head of International Residential Research at Knight Frank.

“Our busiest market since the start of the pandemic has been Provence, which ticks all the boxes for this ‘race for space’ and green living. It’s also kind of reflective of what we’ve seen across the world, with people reassessing their housing needs.

“But there has also been a shortage of supply in both villas and apartments on the French Riviera, with demand as strong as ever.

“And we’re starting to see a return to apartment living especially by the coast – places like Cannes, with its many events, trade shows and exhibitions, where there is again a recognition of value in the apartment market.”

Savills, too, has noticed an increasing trend of Middle Eastern buyers – many of them younger clients – looking to acquire properties closer to the French Riviera’s traditional hotspots.

“They want to entertain large numbers of people and are looking for mint-condition properties well located to the hotspots of Cannes, Monte Carlo and Saint-Tropez,” says Nice-based Alex Balkin, Executive Director of Savills for the French Riviera and French Alps.

Knight Frank is also forecasting that the tightly-packed principality of Monaco, with its myriad apartments, will see prime property prices rise 5% in 2022⁴, buoyed by the ambitious €2 billion offshore extension, known as the Mareterra project, which will reclaim 15 acres of land from the sea and increase Monaco’s land mass by 3% as it races along to completion by 2025.

Paris – golden opportunities?

The Paris 2024 Olympics may be two years away, but property buyers could still win gold in the French capital by taking advantage of prices that are offering real value in a global context.

Prime property prices in Paris rose 6.3% in 2021, and a further 2% in the first half of this year, according to Knight Frank’s Prime France Report 2022³. The French capital is finding its feet once again after the strict lockdowns imposed on Paris early in the pandemic, which slowed the property market in its tracks.

“Prices are climbing, but perhaps not by as much as other major global cities,” says Everett-Allen at Knight Frank.

“Although Paris prime property prices are always quite protected by a lack of new supply, as it’s one of the densest cities in the world – so you never have the level of new developments like you do in a city like London. And there’s also the strength of the dollar against the euro to factor in, which is giving big discounts to Middle Eastern buyers compared to a year ago, as many Middle Eastern currencies are pegged to the US dollar.”

Switzerland – soaring prices at ski resorts

The Swiss Alps are one of the world’s premier ski destinations. Add in the pandemic-accelerated work-from-anywhere trend, and you can see why – in a previous article we wrote on Swiss ski resorts – luxury chalets at some of Switzerland’s high-end ski resorts recorded double-digit price growth through much of the pandemic.

It’s expected that prices will continue to rise steadily at the main resorts like Verbier, Zermatt, St Moritz, and Gstaad.

“The ski resorts have been an unlikely beneficiary of the pandemic,” says Jeremy Rollason, Head of Savills Ski.

“We’ve seen something like 20% year-on-year price growth in some of the Swiss ski resorts. It’s meant a permanent step-up in terms of property values, and while the next phase may be more measured, I still see us being in positive territory for the next 12-18 months – especially with the current demand and chronic lack of supply.”

Away from the mountains, prices around Geneva have also held up well – especially for larger homes with outdoor space. And with 6% prime price growth forecast for 2022, Geneva is expected to be one of Europe’s top property performers this year, according to Knight Frank⁵, with Middle Eastern buyers attracted to Switzerland not just for the tax benefits, but also the privacy and lifestyle on offer.

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