(Bloomberg) -- Qatar sent an engineer to view London’s most expensive home late last year, in hopes that 2-8a Rutland Gate, a mansion overlooking Hyde Park, could be its new embassy one day.
The Gulf state had been considering the purchase for months but lost interest after its inspection revealed the Knightsbridge property required a full refurbishment that would take almost half a decade to complete, according to people familiar with the matter.
The building, which is stripped out ready for renovation works, also proved unsuitable due to complications around converting it from a house into a mixed-use building, the people said, asking not to be named as the details aren’t public.
Qatar’s government media office didn’t respond to an email seeking comment.
Qatar’s short-lived interest in the vacant mansion shows the complex task brokers have in selling one of London’s most famous homes, especially while the high-end market is enduring a slump. The sprawling property, which sold for a record-breaking sum of more than £200 million the last time it changed hands in 2020, has received bids worth around £130 million this year, some 40% below the original asking price, Bloomberg previously reported.
The building, owned by the ex-wife and son of China Evergrande Group founder Hui Ka Yan, remains unsold and is now under a global asset freezing order linked to the collapse of Evergrande, complicating any further negotiations.
Housing Shortage
Rutland Gate has planning permission to be redeveloped as a luxury home, removing a major paperwork headache for certain potential buyers. Westminster, where the property is situated, has restricted the size of new homes to 200 square meters except where it would harm a historically protected building. The residence would be effectively impossible to replicate today.
Qatar’s interest in converting the mansion into an embassy — or any other commercial premises — could have also risked clashing with London’s municipal policies to tackle the housing shortage.
The London Plan, rolled out in 2021 by Mayor Sadiq Khan, prohibits the loss of existing housing unless it is replaced by new homes with at least the same floorspace. In the City Plan for Westminster, all existing residential property is protected from conversion unless the development of affordable housing would better meet need.
The average sale price per square foot in the Knightsbridge neighborhood was £2,165 in November last year, around the time the Qataris were mulling an offer, according to researcher LonRes. Rutland Gate spans about 62,000 square feet (5,760 square meters), implying housing of the same size would cost roughly £135 million — although it’s unclear how much the Gulf state would have needed to spend to satisfy Westminster planners.
Diplomatic Stand-Off
Had the Qataris purchased Rutland Gate, it would have been an upgrade from the nation’s embassy on the east side of Hyde Park, and the latest in a string of blockbuster embassy real estate deals in London. The Gulf state’s concerns around the length of time it would take to refurbish the property and secure building permits suggests it may be motivated to move from its current Mayfair base in the next few years.
The stalled sale of Rutland Gate also reflects a broader slump in the luxury property market, with potential buyers put off by tougher UK taxes for wealthy foreigners as well as higher financing costs. Over the past year, some sellers have resorted to discounts of around 30% to lure buyers, including a £23.5 million home in the neighboring Belgravia district, Bloomberg previously reported.
“The move for non-UK trusts to be subject to UK tax is a step too far for many ultra high net worths,” said Jo Eccles, managing director at buying agent Eccord. “Some have already left the UK and others will do so ahead of April 2025.”
Some brokers say the lack of a dominant landowner in Knightsbridge is having a negative impact on values, particularly north of Harrods where Rutland Gate is situated. This contrasts with the nearby Grosvenor estate in Mayfair and Cadogan in Chelsea, where long-established aristocratic landlords can invest in regeneration and handpick tenants. The area has also been affected over the past decade by an exodus of Russian oligarchs who once made the area their heartland.
Qatari elites have snapped up so much real estate in London over the years that Mayfair has been nicknamed “Little Doha.” Underscoring the links between the two nations, the Emir of Qatar, Sheikh Tamim bin Hamad Al Thani, is in the UK this week for a state visit, which includes an audience at Buckingham Palace and a £1 billion commitment to invest in climate projects.
However, over the past 18 months some of the state’s richest nationals have been looking to move out.
Prime Minister Sheikh Mohammed bin Abdulrahman Al Thani sold a £39 million Mayfair mansion in October last year, around the same time negotiations for a new embassy were taking place. A few months earlier, the Al-Khayyat family, which owns swathes of industry in the gas-rich Gulf state, was mulling the sale of one of Mayfair’s largest townhouses on 38 Hill Street, Bloomberg reported.
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