To buy in Hong Kong, Shanghai or Dubai?

Until a few years ago both Dubai and Shanghai were closed to foreign buyers. Dubai, the UAE and most of the GCC limited ownership to nationals, while in the People's Republic of China all property belonged to the state.

This is no longer the case, with freehold property for sale to all comers on an increasing number of developments in Dubai, and long leases available to foreigners in Shanghai. Needless to say most new buyers in Shanghai are Chinese, and many of them from Hong Kong.

Yet although China is not such a wealthy place as Dubai, the restricted availability of new developments has sent villa prices to $5-6,000 per square metre, while in Dubai $2,000 is a more general benchmark.

This price differential highlights the competitiveness of Dubai in terms of real estate. The booming emirate has managed to contain prices, although some of the earliest units have doubled or trebled in value.

Aside from Shanghai, it is also interesting to note a recovery in Hong Kong real estate prices which now hover approximately 50% above price levels seen in Dubai.

All things in property are relative: in the late 1990s Hong Kong realty was double the price of London; today London is double the price of Hong Kong. That leaves London about three times more expensive than Dubai.

Of course these are very different markets, and the dynamics are different too. London prices are falling, while Hong Kong, Shanghai and Dubai are enjoying the impact of the Chinese economic boom and high oil prices, not that these two factors are not strongly linked.

But it is hardly surprising that Dubai property continues to attract global interest when these cost comparisons are made. Clearly in Shanghai the price of new property is too high for many buyers and should fall as new supply is organized.

Hong Kong too has recovered from its post-1998 Asian crisis, dot-com bust and SARS emergency. But a 70% slump in property prices since the handover of sovereignty in 1997 followed by recovery which still leaves prices 30% or so off their peak does not engender much confidence in the future outlook.

No if you look at the fundamentals, Dubai is the boom town with low property prices. And so it is to be expected that the largest crowds at the Worldwide Property Show in Hong Kong this weekend will be at the Dubai stands.