Qatar continues foolish London property buying spree

Posted on 19 June 2010 with 2 comments from readers

Qatar is extremely ill-advised in making a massive London property buying spree. Any fool ought to see that this can only end badly. The falling pound seems to make London a good buy for dollar-rich property buyers but buyer beware.

Just watch for the UK’s new age of austerity in the new government’s first budget next week. UK property is at the second stage of a double top. Interest rates can only go up from here. That is always, always bad news for real estate. Prices will go down and stay down.

The pound may also fall to $1.20 or even $1 as it did in the late 1970s. So lower prices will be even lower when converted into dollars. Besides what does a recession do to demand for property?

Spoilt children

Qataris are behaving like children in a sweetshop with too much pocket money. They see tasty prestige assets and want to buy them. Nevermind the price, we have the cash from our gas.

Yesterday the Barwa Real Estate Company splashed out $370 million to buy Park House. It is not long since the Qataris bought Harrods for their sovereign wealth fund, with shrewd owner Mohammed Al Fayed cashing out before the coming UK recession.

You only have to open a UK newspaper to know that this is true. The government’s age of austerity is going to make hundreds of thousands unemployed and slash GDP growth, probably back into negative territory.

There are also reports that the Qatar Investment Authority wants to buy the shares in London’s Canary Wharf financial district that it does not already own. And the Qatar sovereign wealth fund is in talks to buy The Savoy which Prince Alwaleed has been trying to offload since the financial crisis.

Powerhouse buying

It is hardly surprising that agents are keen to help a client with this sort of money. They describe Qatar as a ‘powerhouse’ of global real estate investment this year.

Will the Qataris live to regret these decisions and see the value of their acquisitions fall substantially? Then those selling today can buy back at a cheaper price tomorrow. That is how it works in global real estate, with happy agents collecting commissions.

But anybody tempted to follow this example should beware the reality of the global financial markets and the likely impact of a double dip recession on London. For that is what is coming, the government is actively promoting it, and low interest rates make a property crash an absolute certainty when rates rise.

And when the gas market keels over, and that is what the futures market very clearly predicts right now, the Qataris will wish they had been more sensible with their property investments.