This isn't a cross post from my blog, but actually I added recent data that enabled to make a bigger picture, but for the readers' sake, I am repeating the basics here below.
You see, I am in financial markets and investment. That means money, numbers, and economics. So I wanted to do a little digging that involves my better honed, albeit geeky, skills to see exactly how far the financial figures are cooked here in the UAE, and how bad things have become recently (
11.1% inflation my @$$!!)
Anyway, below is a tabulated chart of my findings (I could not, for the life of me, manage to get a proper table in here, so I resorted to the old "print screen" and save as a GIF file trick):
- The salary data are median salaries collected indirectly through several agencies, and represent a sample of at least 10 people out of each country for each job listed (So at least 30 people of each country were tabulated).
- The rents data were collected directly from various sources, mostly classified listings and real estate agencies.
click on the figure for a clearer read
So what are some of the conclusion of this small research:
1- That despite having the lowest income across the board, Dubai has the highest minimum rent out of all those major cities of the World, especially in studios. What this means is that even though all major cities have quite expensive penthouses and Villas, they all present OPTIONS of lower rent for those without great means to live in those cities, supplying their economy with a vibrant middle class, which strengthens the consumption spectrum and creates a solid small and medium enterprise base. It means that even in the most expensive city in the World like Tokyo, you DO have the option of landing a $500 a month studio. A 10% lower limit of $950 per month did not exist in ANY city checked, this is the HIGHEST in the World, a serious issue that has to be handled if Dubai expects to grow its community and economy and attract more businesses to fill those rising office and residential towers.
2- Dubai was the only city out of all checked (with the exception of Jeddah and other Saudi cities though still not even close to being as widespread as in here), that had the abominable quarterly to annual rent payment system. Right now more than 60% of offered properties demand single payment for the whole year. In addition to being the only city that now bans sharing and regulates carpooling with heavy fines, this must be one of the biggest cash-flow challenges facing individuals here and a needless hurdle to prosperity.
This is actually where the numbers cannot match: The best (legal) option a person can find for accommodation is around $4000 (1000 for security deposit and 3000 for three months on a cheap $12,000 a year studio), yet the average monthly income for an average 5 year experienced office manager or accountant is $2,500 (MANY take less, some a LOT less). This way, it will take two months for a new recruit to pay the rent while eating one meal a day and sleeping on the cold hard floor as they can't afford buying or even renting furniture at this point, and the third month will have to be all saved to pay the next quarter's cheque of $3000!!
Additionally, basic sense shows that there is sound economical
reason for such high rents over there, and that is a combination of two factors:
1) In Tokyo, New York, and Hong Kong there is a large native population that can more than fill all the properties. Expats form less than 30% in those cities, and if they leave, the natives who work for hundreds of billion dollar national businesses groups will always more than fill the void and will be willing to pay the high rent thanks to the strong income. Tokyo has 12 million citizens, and Japan totals above 125 million over the country. Hong Kong, Singapore, New York and London all have large native populations desiring to build lives in their major cities. Dubai has 250,000 citizens out of around 2 million population now (90% expats!!), and the whole country has less than 1 million citizens, most of whom DON'T like this city's lifestyle because it doesn't match the Emirati culture, so if expats leave, few will fill their place, but never the whole void.
2) In all those cities, space is LIMITED. As in nowhere else to grow the city. Hong Kong and Singapore are islands built to the maximum, Tokyo is absolutely closed and has nowhere to go. London is stuck in the green belt, New York is squeezed between the sea and New Jersey. So everyone compete for the limited space left. Dubai has all the empty land it can ever want to use for expansion, both towards Jebel Ali and deep inland towards Al Ain. There is no reason whatsoever for properties to have exorbitent prices.
Based on this and from the authority of my profession I am giving this professional conclusion that might be unpopular albeit true:
Real estate in Dubai is over-inflated by other factors non-related to actual demand or long-term actual supply limitation, and therefore it has formed an inflationary bubble that WILL burst and leave thousands of empty property units and millions in lost value as prices crash.You probably did NOT hear it here first. :)
Dubai Warrior
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