Kuwait’s finance min expresses confidence in UK investments – Brexit vote unlikely to curtail Gulf appetite for British property

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DUBAI, June 27, (Agencies): Kuwaiti Finance Minister Anas Al-Saleh said on Monday that the Gulf Arab kingdom’s investments in Britain were “high-quality and long-term”, state news agency KUNA reported.

His message was delivered to a Cabinet meeting which discussed the impact on Kuwait of the British vote on Thursday to leave the European Union which has rattled markets and pushed the value of the British pound to a 31-year low.

“Kuwaiti investments in Britain are considered tangible assets in real estate, infrastructure and government stocks and bonds. They are high-quality and long-term investments,” Saleh was quoted as saying.

“Direct effects can not be excluded during the current period represented in the pound sterling, the euro and interest rates pricing,” he said, adding that Kuwait’s central bank was ready to ensure financial stability.

The Kuwait Investment Authority (KIA), has $592 billion in assets under management, according to the Sovereign Wealth Fund Institute (SWFI), and is also a major investor though its London-based Kuwait Investment Office.

In 2013 it said the fund had more than doubled its investment in Britain over the previous 10 years to more than $24 billion.

Kuwait owns London landmarks such as the More One riverside development which houses the headquarters of the mayor, as well as buildings in Canary Wharf. It has focused on infrastructure investments through its Wren House Infrastructure Management arm, set up in 2013.

Meanwhile, Harrods, the Savoy, the Shard — London property has long been a magnet for Gulf investors and Britain’s vote to leave the European Union is unlikely to dampen their interest, analysts say.

In fact, the Brexit vote could even see a surge in activity as wealthy Gulf buyers look to take advantage of the dramatic fall in the value of the pound.

Attracted to London property as both a sure-fire investment and for the cachet of ownership, Gulf investors have invested billions of their oil windfalls into British real estate.

CNBC Arabiya television recently reported that total Gulf investments in Britain amounted to about $200 billion, of which $45 billion was in real estate. And Britain accounts for 40 percent of all Gulf investments in European property, it said.

Monica Malik, chief economist at Abu Dhabi Commercial bank, said that with so much invested it would take more than the Brexit vote to shake Gulf confidence in the London property market.

“In the near term, there will be a sentiment of cautiousness but we do not expect a marked sell-off,” she said.

“A knee-jerk reaction or panic is unlikely,” she said.

“Property in the UK is very attractive and has been a well-performing asset class. The underlying foreign demand is expected to remain strong once the uncertainties subside.”

Top British assets held by Gulf owners include a 50 percent stake in London’s legendary Savoy hotel controlled by Qatar. The gas-rich state also owns the Shard skyscraper in central London and the Harrods department store.

A part of London has been dubbed the “Qatar Quarter” because so much property has been bought by the country’s investors. The London-based Rokstone estate agent estimated earlier this year that Qataris now own property worth more than one billion pounds in London’s poshest area, Mayfair.

“Qatar is one of the most high-profile investors in London, snapping up landmarks,” said M.R. Raghu, head of research at the Kuwait Financial Centre (MARKAZ).

The royal families of the United Arab Emirates are also known to hold prestigious assets in the British capital.

“Investors from the UAE accounted for more than 20 percent of buy-to-let property sales in the UK in 2015,” Raghu said.

Ownership levels are so high, Raghu warned, that a crash in British real estate would have a “huge impact” on Gulf investors.

But for now analysts expect to see even more buying of London property from investors in the six-nation Gulf Cooperation Council, where currencies are mostly pegged to the US dollar.

“The fall in the value of sterling could make the UK an even more attractive place for GCC nationals to invest in London property,” said Gulf expert Neil Partrick.

 The Brexit vote “has weakened the pound and it will make property cheaper for investors” from countries where currencies are tied to the dollar, said Dana Salbak, an associate partner at the Knight Frank property consultancy.

“What we are seeing now, and we expect to see over the next couple of months, is that this activity (buying property) will pick up and they will start securing their purchases,” she said.

For Damian Wild, editor of weekly British property magazine Estates Gazette, “the medium-term story remains strong” because with the weakened pound “there is certainly a currency play to be had.”

Qatar, for example, is “heavily invested in London for the long-term and, short-term matters aside, there’s no reason why that shouldn’t continue,” he said.

And while Gulf investors have bought significant property assets elsewhere — especially the Qataris in Paris — Partrick said London would continue to hold a special place.

There is a “historical and linguistic familiarity” with Britain in the Gulf, where most GCC countries are former British protectorates, English is the de facto second language and sizable communities of British expatriates live and work.

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