Dubai offers homebuyers strong value even as bubble risks remain, says UBS

Dubai remains a relatively attractive housing market, even as property bubble risks persist, according to a new report by UBS. The emirate's high rents still favor homeownership, placing Dubai fourth among 23 cities in the UBS Global Real Estate Bubble Index, with a score of 1.16. Only Zurich and Tokyo are deemed at high risk. Despite elevated valuations, Dubai stands out as one of the few markets where buying a home is comparably affordable to renting, as UBS explained.

Inflation-adjusted home prices grew by only 0.4% annually in the second quarter, while real rents dropped by 4%. The index measures bubble risk based on factors like decoupling of prices from income and rents, along with economic imbalances such as excessive lending and construction. A shift in macroeconomic conditions, investor sentiment, or a surge in housing supply could trigger a price correction.

Even with high mortgage rates, Dubai remains affordable for skilled workers, who need only five years of income to purchase a 60-square-meter apartment near the city center, compared to 11 years in London and 15 in Hong Kong. The city ranks higher in affordability than Toronto, Miami, Tokyo, Paris, Seoul, Singapore, Lisbon, Zurich, Geneva, Sao Paulo, Munich, Sydney, Milan, and New York.

Although uncertainty over the return of high-income earners due to the Iran conflict might dampen demand for premium properties, Dubai's strategic location and status as a global business hub remain strong. Mohamed Alabbar, founder of Emaar Properties, anticipates a balanced market next year despite supply increases, predicting a 5-10% adjustment due to the ongoing Iran war.