Nearly three in ten high-net-worth individuals from the Gulf Cooperation Council nations — comprising Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Bahrain and Oman — have direct property investments in London, according to the latest Gulf Cooperation Council Investment Barometer published by AlRayan Bank. The survey of 150 Gulf HNW individuals with minimum wealth of £10 million confirms London’s position as the leading international city for wealthy Gulf capital, even as the UK property market faces a confluence of tax and regulatory pressures.
The headline number: 29%
The survey found that 29% of GCC HNW respondents hold direct property investments in London — a higher proportion than Dubai-based, Singapore-based, or New York-based properties for international Gulf investors. Of those London-invested, the average property value sat at approximately £4.2 million, with positions concentrated in Knightsbridge, Mayfair, Belgravia, Kensington and Marylebone.
The motivation pattern remains consistent with previous decades: London is valued for the rule of law, the established legal infrastructure for high-value real estate, the depth of the rental market for prime stock, and the city’s long-standing position as a base for education and healthcare for Gulf families. The British education system, particularly the City of London independent schools and the University of London colleges, remains a primary draw.
What is changing: tax and regulation
Three pieces of UK tax and regulatory policy now affect Gulf investors materially. First, the 2% Stamp Duty Land Tax surcharge for non-UK resident buyers, introduced in 2021, applies on top of existing rates — pushing total stamp duty on a £5 million property toward 17%. Second, the mansion tax surcharge, due to take effect from 2028 on properties worth £2 million or more, will add an annual fixed charge of approximately £7,500 for a £10 million property, rising to £30,000-plus for properties valued above £20 million.
Third, the Renters’ Rights Act, which came into force on 1 May 2026, has changed the buy-to-let calculation for landlords by abolishing Section 21 evictions, banning bidding wars, and capping in-tenancy rent rises. For Gulf investors who hold London properties primarily for capital appreciation rather than rental income, the Act’s impact is limited; for those running rental portfolios, the regulatory burden has increased materially.
Why London is still chosen
Despite these pressures, the survey identifies four reasons London continues to dominate the Gulf international investment portfolio. The first is currency dynamics: sterling has weakened materially against the dollar — and therefore against the dollar-pegged dirham and rial — over the past three years, making London property cheaper in Gulf-currency terms than at any time since 2008.
The second is relative valuation: prime central London prices are still approximately 30% below their 2014 peak in real terms, while comparable cities — New York, Sydney, Singapore — have seen significant appreciation over the same period. For long-term investors, London is being priced as a value market, not a momentum market.
The third is diversification: Gulf investors increasingly spread holdings across multiple jurisdictions for political risk reasons, and London remains the natural Western European anchor in any global property portfolio. The fourth, more practical, is the density of Arabic-speaking professional services — law firms, private banks, real estate agents — that Gulf clients have built relationships with over decades.
The Middle East return migration
An increasingly notable trend identified by Knight Frank and other prime market analysts is temporary return migration from the Middle East to London. Since the Iran conflict began in late February 2026, demand for prime London rentals — particularly serviced apartments and high-end short-let properties in Knightsbridge and Mayfair — has increased materially. The pattern suggests Gulf families with London property holdings are using those holdings as temporary residence options rather than as pure investment vehicles.
This dynamic mirrors the post-2009 pattern, when geopolitical instability drove overseas capital into prime central London following the Global Financial Crisis. The current cycle is more focused on rental demand than on new acquisitions, but the underlying logic is similar.
Sectoral preferences
Survey respondents indicated clear preferences for specific property types. Apartments in luxury developments — particularly the major schemes in Mayfair (Mayfair Park Residences), Belgravia (the Old War Office), and Marylebone (the Chiltern Firehouse adjacent developments) — are favoured over townhouses or freehold properties, primarily for ease of management and concierge services.
Outside the prime centre, demand has notably increased for high-quality new-build apartments in Canary Wharf, Battersea Power Station, and Nine Elms, where modern facilities, security, and views are valued. Traditional historical districts remain dominant, but the share of investment going to new developments has risen from 15% in 2018 to approximately 32% in the current survey.
Outlook for the rest of 2026
The Iran conflict and its currency consequences are likely to increase Gulf demand for London property over the coming 12 months, despite tax and regulatory pressures. The combination of weaker sterling, prime market value relative to historical peaks, and political risk diversification motivations will dominate over the marginal cost of higher tax burdens.
For UK policymakers, this picture is a quiet positive: at a moment when the broader economy faces strain, the London property market continues to attract significant overseas capital — capital that supports construction, services, and the broader London economy.
— Thomas Hargreaves, London Capital Post
