Dubai Real Estate: Elevated Bubble Risk or Global Bargain?

Tim Elliott (0:00)

It's the Morning Drive, our topic this morning, real estate, Tuesday morning. Ajay Menon is the CEO of Luxe Vista Properties. He's with me. Bubble risk versus affordability to buy property. Nice to see you, Ajay.

Ajay Menon (0:13)

Good question, good morning.

Tim Elliott (0:14)

Here's a riddle for anybody who owns or rents or maybe dreams of buying in Dubai. One of the world's biggest banks says our property market carries a bubble risk. So, the same bank says Dubai is one of the cheapest major cities on the planet to buy a home.

So, which of those is true or is it both?

Ajay Menon (0:33)

Both.

Tim Elliott (0:34)

Yeah, I don't get this. But understanding this is going to save you some money. So, this is UBS, right?

Ajay Menon (0:40)

UBS, the biggest private bank in the world.

Tim Elliott (0:42)

So, the 2026 Global Real Estate Bubble Index. Who knew that existed? Let's try and unpack that.

Everybody's talking about this, apparently, a number.

1.16 up from 1.09 last year. So, in plain English, 1.16 is in the elevated band, according to this. So, it's not a warning. It's a warning light, not an alarm, really, I suppose. But what does it mean?

Ajay Menon (1:12)

It is a warning of sorts.

Tim Elliott (1:13)

Of sorts, right.

Ajay Menon (1:14)

Okay. So, the bubble index is just that.

It has low risk, moderate risk and elevated risk. Okay. And Deva is at an elevated risk, which is at 1.16. Right.

And they've taken actually 23 cities, global cities. Yeah. And we are number four in that list.

Tim Elliott (1:36)

Okay. Should that worry us that we're number four?

Ajay Menon (1:39)

Slightly.

Tim Elliott (1:40)

Slightly. Okay. It's all very kind of slightly, a little bit, not really kind of.

So, we're behind Zurich, Tokyo and Miami.

Ajay Menon (1:49)

That's correct, yes.

Tim Elliott (1:50)

Okay. Okay. So, here's what confuses me.

The score went up, but UBS also says the bubble risk has eased since March this year.

Ajay Menon (2:00)

March 2026 Yeah.

Tim Elliott (2:01)

So, I don't know how those can be true.

Ajay Menon (2:04)

Now, forget that part first. We have to break it down to why it is this way and that way. Okay.

Tim Elliott (2:10)

I'll let you do that.

Ajay Menon (2:11)

So, let's take the first indicator. The first metric is something called the affordability factor.

Tim Elliott (2:18)

Right.

Ajay Menon (2:18)

Or, it's the price to income ratio. That means it takes five years for a skilled worker in Dubai, an average skilled worker in Dubai, to pay for his property, which is 650 square feet in the city center.

Tim Elliott (2:41)

Okay.

Ajay Menon (2:41)

That is one of the main metric.

Tim Elliott (2:43)

Okay. So, five years in Dubai to do that. If you were to take an average.

Ajay Menon (2:49)

Exactly.

Tim Elliott (2:50)

Compared to?

Ajay Menon (2:51)

Compared to 15 years in Hong Kong, 11 years in London. So, a person in London has to work for 11 years and use all that money without spending anything and then buy a property.

Tim Elliott (3:04)

Right. Okay.

Ajay Menon (3:05)

Then he can afford to buy that property, a 650 square feet apartment in the city center in that particular city.

Tim Elliott (3:10)

Okay. So, I'm looking at the figures here. You're right. Hong Kong, 15 years, London, 11 Tokyo, Paris, Seoul, more than 10 So, we are the third most affordable behind...

Ajay Menon (3:21)

Toronto and Miami.

Tim Elliott (3:23)

Toronto and Miami.

Ajay Menon (3:25)

T.

Tim Elliott (3:25)

Yeah, that one. All right. So, a lot of people listening or watching this will kind of hear affordable and laugh, I would guess. Rents and prices have climbed substantially in the last five years.

Who is this five-year figure actually true for?

Ajay Menon (3:46)

Average skilled income worker. Just that.

Tim Elliott (3:49)

Okay. So, the likes of you or me?

Ajay Menon (3:51)

Yes.

Tim Elliott (3:51)

Well, skilled, using that term loosely, but you know. Yeah.

Ajay Menon (3:56)

Now, you still can buy anything. I mean, you don't have to buy an Omnia Dorchester collection. You still can buy a 650 square feet apartment for whatever salaries, the meager salaries that we're getting.

Tim Elliott (4:09)

I suppose so. So, Dubai is cheaper than London or Hong Kong, but what is structurally different then between the locations?

Ajay Menon (4:20)

Nothing. I mean, it's just what they've taken is like they've taken the average salaries of that particular area, and they've taken the property prices in that particular area.