What’s the best investment: a house in North Oxford or villa in New Dubai?Posted on 12 May 2013 with 1 comment from readers
Large houses in the wide and leafy roads of North Oxford are priced well ahead of what the college professors who originally lived in them can afford today. They have become popular with hedge fund managers and city folk who perhaps attended the university and want this lifestyle for their families.
The established communities of New Dubai have a similar allure for the expats and diaspora of the Middle East. Their villas offer the same size of space and palm trees line the well manicured streets. The schools and community facilities are excellent.
Pricey North Oxford
Yet you will pay three times as much in North Oxford for a house than you will for a villa in tax-free New Dubai. About $5 million for a 300 square metre house versus $1.8 million. Yet you see the same high-end cars parked in the drives. So which residential address is the best investment?
You might as well ask who has the better career prospects: the owners in New Dubai or North Oxford? If you think the UK financial sector looks doomed then its generally highly borrowed participants are going to become less and not more wealthy going forward.
Then again you can simply ask which location looks cheap relative to the other. New Dubai is clearly the winner. Why is it that North Oxford house prices have been bid so high?
Basically it is the same problem that estate agents report now about New Dubai established communities like The Meadows or Jumeirah Islands. There is a shortage of supply of a specific type of property in a specific location with special qualities.
In the case of New Dubai that means proximity to the sea and the high-rise zone of the Dubai Marina and Jumeriah Lake Towers and the Dubai Multi Commodities Centre and other free zones like the Dubai Internet and Media Cities and the amazing Palm Jumeirah.
Should you be able to buy in this location in the Middle East’s undisputed commercial hub city for one third of what you would pay in North Oxford? Probably not.
North Oxford house prices do, however, look to be a bubble. Hedge funds have struggled since the global financial crisis and may be a dying breed. The low interest rates that made them rich and allowed them to afford big mortgages are not going to last forever.
True buyers in New Dubai may have access to low cost funds from a global source of lending but they are still more likely to be cash buyers, just as the hedge fund managers were when they were younger and came to North Oxford to spend their first bonuses. Dubai villa buyers today often have cash from regional business deals that they want to invest in a safe jurisdiction.
Following the money is ultimately why New Dubai just has to be a better buy than North Oxford. How long before prices catch up?