Dar Global: UK property laws ‘cannot change with every PM’

• Targeting distressed London assets
• Insolvencies at almost decade high
• Stamp duty deters investors

Dar Global, the worldwide development arm of Saudi Arabia’s Dar Al Arkan, is looking to acquire distressed residential developments in prime central London.

The London-listed luxury developer is assessing projects in the British capital’s plushest neighbourhoods – including Mayfair, Belgravia and Knightsbridge – where higher refinancing costs, debt repayments and failed completions have left some developers and secondary market investors under pressure, weighing on property values.

“We believe the market has been hit very heavily,” chief executive Ziad El Chaar told AGBI.

“We’ve been having discussions with our consultants and bankers who believe maybe it’s the right time to buy, but it’s not the right time to start selling. You need to buy and hold until the market finds a path to recover.”

Dar has operated in London for about three decades and specialises in selling luxury homes to international buyers.

“A lot of projects are facing financial difficulties in London,” El Chaar said.

More than 760 real estate-related businesses have entered insolvency in the UK this year, the highest rate in almost a decade, City AM reported last month, citing the London Gazette registry of insolvencies.

UK developers and contractors said the Iran war had also hit buyer confidence, slowed demand and pushed up construction costs, compounding pressure from high finance costs and political uncertainty.

El Chaar said the opportunity in central London was tempered by uncertainty over UK property regulations.

“One of the critical elements of investing today, especially in real estate, is the stability of decision-making,” he said. “Real estate investment laws cannot change with every prime minister.”

The UK is about to appoint its seventh prime minister in 10 years after Keir Starmer said last month that he would step down from the post.

Andy Burnham, the ruling Labour Party’s frontrunner to succeed him, has long advocated reforms to property, land and inheritance taxes that could affect high-value homes and residential property portfolios.

Burnham has not yet been confirmed as prime minister or published a tax manifesto but previously suggested a land levy could replace council tax and stamp duty.

He told the Telegraph in May that he had “long been persuaded of the argument” for such a levy, saying private land was “under-taxed”. In its budget announcement in November last year, Labour unveiled a “high value council tax surcharge”, dubbed the mansion tax, on homes worth more than £2 million ($2.7 million).

Prime central London residential prices remain about 24 percent below their 2014 peak after successive tax increases, changes to the non-dom regime (for UK residents whose permanent home is considered to be outside the UK for tax purposes) and elevated borrowing costs curbed demand, according to real estate consultancy Savills.

Savills expects prices to soften further this year. It said global wealth had remained “reluctant” to return to London despite heightened geopolitical uncertainty where “we might have expected stronger safe-haven flows” into the capital.

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El Chaar said he is seeing prices in central London that are “cheaper than the prices after the financial crash of 2008”.

“Opportunities are there, but the main question in the central London market is: if you buy now, when can you plan for recovery? How much time do you need to hold?”

The UK’s stamp duty on second homes can reach 17 percent on the portion of a property’s value above £1.5 million. That, along with taxes on rental income and uncertainty over future property levies, makes it difficult for international investors to generate acceptable returns, El Chaar said.

“You’re going to need five to six years just to recover your stamp duty,” he said.

“The market finds it very difficult when the rules keep changing.”