Dubai has emerged as one of the world’s more affordable major cities for property ownership relative to local incomes, ranking third in the UBS Global Real Estate Bubble Index among 23 cities assessed.
According to the index, only Toronto and Miami rank ahead of Dubai when housing affordability is measured against income.
The UBS assessment looks at the number of years of income an average skilled service-sector worker would need to buy a 60-square-metre apartment located near a city centre. In Dubai, the figure is about five years, indicating a relatively shorter income period required to purchase a home compared with several other major international markets.
The difference is more pronounced in some of the world’s most expensive property markets. A similar apartment would require about 15 years of income in Hong Kong and 11 years in London. The figure also exceeds 10 years in cities including Tokyo, Paris and Seoul.
Dubai records low price-to-rent ratio
Dubai also ranks second globally, after São Paulo, for its relatively low property price-to-rent ratio.
The ratio measures how many years of rental income would be required to equal the purchase price of a property. In Dubai, the ratio stands at about 16 years, meaning the purchase price of an apartment is equivalent to approximately 16 years of rental income.
That compares with much higher ratios in several other global cities. The figure stands at about 46 years in Zurich, 40 years in Geneva and 25 years in Seoul, while it exceeds 30 years in Munich, Frankfurt and Hong Kong.
A lower price-to-rent ratio generally indicates that property prices are more closely aligned with rental income, while a higher ratio suggests that purchase prices are significantly higher relative to the income generated by renting out the property.
Buying versus renting
The UBS findings also indicate that property ownership in Dubai remains more cost-effective than renting a similar residence, making homeownership a potentially attractive option for residents considering a long-term housing decision.
The cost of owning a property, however, involves more than the purchase price and needs to be considered alongside other expenses associated with ownership.
tanvir@dubainewsweek.com
