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Discuss this article (6 Comments)UAE real estate 'up to 50% dearer than Europe'
by This email address is being protected from spam bots, you need Javascript enabled to view it on Tuesday, 28 April 2009
PRICE DIFFERENCE: Using median income calculations, UAE real estate is up to 50 percent more expensive than Europe, says a research analyst. (Getty Images)
Real estate in the UAE is up to 50 percent more expensive than in Europe if comparisons are based on median income estimates rather than GDP per capita, Al Mal Capital’s head of equity research has said.
Based on calculations using the gross domestic product (GDP) per capita as a key indicator of wealth, house prices in the UAE are roughly on par with those in Europe.
But when looking at the median income, the average price of a home in the country becomes up to 50 percent higher than in Europe, Robert McKinnon said.
The median household income is the number that splits income distribution into two equal parts, with one half of the cases falling below the median and one half ending up above it.
“If you take a GDP per capita number and assume that everybody is earning that money, it distorts [projections] when roughly around 80 percent of the wealth is in the top 10 percent of the population, and you only need one home,” said McKinnon.
At current price levels, the typical home owner in the UAE would still pay around 50 percent of his or her salary in mortgage costs, he said.
“If you assume a median income in the UAE of AED25,000 a month, and this is very generous, and you look at a medium, two bedroom place, it’s roughly AED1.5m. That is going to cost you somewhere around AED12,000 a month in mortgage payments.”
The median income is likely to be lower than AED25,000 given the high number of labour workers in the country, he added.
On a positive note, McKinnon said that a limited population decline may not necessarily be bad news for real estate developers.
“There is a bit of a misconception that population is demand. That is not necessarily the case. In reality, demand is the number of people that are willing and able to buy a home.
“They’re willing at a certain price, and as prices go up that takes people out of the demand equation, and that’s exactly what happened in Dubai last summer and a little later in Abu Dhabi.”
Al Mal Capital is forecasting UAE real estate prices to fall by another 10 to 15 percent before bottoming out, with a slightly larger decline in the Dubai market than in Abu Dhabi.
READERS' COMMENTS
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UAE real estate
Posted by macca on Tuesday 5 May 2009 at 13:06 UAE time
Al mal is way out of line to suggest that there is discrimination against Muslims in the west. This is plain and simply wrong. The UK and many other western countries have legislated and enforced that legislation to the extent that we have broken our very core values of freedom of speech to silence those people who would speak against Muslims in and negative way. We protect all religious groups including Muslims, Jews, Hindu etc can that be said of any country in the middle east ? My Jewish friends are not allowed religious freedom in the UAE and they travel in and out in UK passports not their Israeli ones. Real estate varies wildly in the UK. In my home town in the UK north west a 2 bed terrace house can still be bought for AED 250,000 - Burnley Lancashire. Same house in Leeds is AED 1m London is AED 5m.
Posted by macca on Tuesday 5 May 2009 at 13:06 UAE time
Al mal is way out of line to suggest that there is discrimination against Muslims in the west. This is plain and simply wrong. The UK and many other western countries have legislated and enforced that legislation to the extent that we have broken our very core values of freedom of speech to silence those people who would speak against Muslims in and negative way. We protect all religious groups including Muslims, Jews, Hindu etc can that be said of any country in the middle east ? My Jewish friends are not allowed religious freedom in the UAE and they travel in and out in UK passports not their Israeli ones. Real estate varies wildly in the UK. In my home town in the UK north west a 2 bed terrace house can still be bought for AED 250,000 - Burnley Lancashire. Same house in Leeds is AED 1m London is AED 5m.
Al Mal report
Posted by aayu, Dubai, UAE on Saturday 2 May 2009 at 14:08 UAE time
This report is a clear indicator how isolated these reports are from the market situations. Indeed all greenhorns are doing this report.
First of all 50% of the property in dubai is not purchased by people living here. Thus nullifying the basis of report.
Secondly, Euopean income should be adjusted for Tax, which will automatically makes it lower by around 30%.
If this is any yardstick then Abu Dhabi with its high Income the property is low priced...Is it a reality?
What about Wealth and property tax.
1.2 Million for 2 BHK is a high average. One can get numerous choices at 900K.
The reason that rental yield (Still in the downturn) are amongst highest amongst the world. A paradox to the report...A heaven for investors.
A majority of properites are second home for many people who are living in countries like Iran, Pakistan, Iraq , CIS and russia where uncertain domestic situation, their ability to purchase and cultural proximity makes a best choice. With all sorts of discrimation against Muslims in western world. What is the best choice to balance ....liftstyle , religion and standard of living...Of course safety and security.
The the second wave of Business class, long resident Indians from UAE. Who have long term interest in Dubai.
Take into account above diaspora you have the critical mass.
what killed the market is gambling tendency...which is certainly at a low ebb now and forever.
Posted by aayu, Dubai, UAE on Saturday 2 May 2009 at 14:08 UAE time
This report is a clear indicator how isolated these reports are from the market situations. Indeed all greenhorns are doing this report.
First of all 50% of the property in dubai is not purchased by people living here. Thus nullifying the basis of report.
Secondly, Euopean income should be adjusted for Tax, which will automatically makes it lower by around 30%.
If this is any yardstick then Abu Dhabi with its high Income the property is low priced...Is it a reality?
What about Wealth and property tax.
1.2 Million for 2 BHK is a high average. One can get numerous choices at 900K.
The reason that rental yield (Still in the downturn) are amongst highest amongst the world. A paradox to the report...A heaven for investors.
A majority of properites are second home for many people who are living in countries like Iran, Pakistan, Iraq , CIS and russia where uncertain domestic situation, their ability to purchase and cultural proximity makes a best choice. With all sorts of discrimation against Muslims in western world. What is the best choice to balance ....liftstyle , religion and standard of living...Of course safety and security.
The the second wave of Business class, long resident Indians from UAE. Who have long term interest in Dubai.
Take into account above diaspora you have the critical mass.
what killed the market is gambling tendency...which is certainly at a low ebb now and forever.
Dubai Real estate vs Europe
Posted by Najib Ullah, London, United KIngdom on Friday 1 May 2009 at 02:16 UAE time
I think it wrong to say Dubai real estate is 50% higher than of Europe because if you get a waterfront property in London or Paris or any big euorpean city it will be 3 to 4 times the price of what is in Dubai excluding the palm and villas away from see are now at a reasonable price and offer open spaces etc whilst in europe a studio can cost 800k to a million dirhams in a suburb with no comparison to bright and clean and law and orderly Duabi.
People are trrying to bring Dubai down so same people can buy it cheap nice try dont be fooled hold on Dubai has value......
Posted by Najib Ullah, London, United KIngdom on Friday 1 May 2009 at 02:16 UAE time
I think it wrong to say Dubai real estate is 50% higher than of Europe because if you get a waterfront property in London or Paris or any big euorpean city it will be 3 to 4 times the price of what is in Dubai excluding the palm and villas away from see are now at a reasonable price and offer open spaces etc whilst in europe a studio can cost 800k to a million dirhams in a suburb with no comparison to bright and clean and law and orderly Duabi.
People are trrying to bring Dubai down so same people can buy it cheap nice try dont be fooled hold on Dubai has value......
Indeed
Posted by Venkat, Kuwait City, Kuwait on Wednesday 29 April 2009 at 09:23 UAE time
I had looked at so many reports in the market published in the past which talks about demand forecasting by dividing the population by an assumed number of average household size and cook demand to their convenience. Believe me, you can get any number of demand you ask for with that model and you can forecast undersupply even in the current scenario, only that now, people are not doing that fearing of verbal shoe throwings...
Posted by Venkat, Kuwait City, Kuwait on Wednesday 29 April 2009 at 09:23 UAE time
I had looked at so many reports in the market published in the past which talks about demand forecasting by dividing the population by an assumed number of average household size and cook demand to their convenience. Believe me, you can get any number of demand you ask for with that model and you can forecast undersupply even in the current scenario, only that now, people are not doing that fearing of verbal shoe throwings...
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