Middle Eastern cities are making remarkable advancements, as highlighted by the 2025 IMD Smart City Index, showcasing their growing prominence in the global landscape of smart urban development.
In this year’s IMD Smart City Index, Dubai has achieved major progress, securing the 4th position, a significant leap from 12th in 2024. This reflects the city’s advancements in urban development and technological integration. Similarly, Abu Dhabi has demonstrated impressive growth, rising to 5th place from 10th, highlighting its dedication to enhancing smart city initiatives and improving overall livability.
AlUla in Saudi Arabia, Kuwait City in Kuwait, and Manama in Bahrain have emerged as notable contenders, reflecting significant progress in their urban strategies. However, alongside this growth, the ability of city dwellers to secure affordable housing is declining globally, indicating that prosperity is not being shared inclusively. This trend profoundly affects the quality of life for a broad spectrum of the urban population, as highlighted by the Index.
The report, titled “The Housing Affordability Challenge: A Growing Concern in Smart Cities,” evaluates six new cities in 2025—AlUla, Astana (formerly Nur Sultan) in Kazakhstan, Caracas in Venezuela, Kuwait City, Manama, and San Juan in Puerto Rico—bringing the total assessed cities to 146.
Published by IMD’s World Competitiveness Center (WCC), the Index is based on 39 survey responses from residents representing diverse social strata. The report’s direction was influenced by responses to the crucial question: “Is finding housing with rent equal to or less than 30 percent of the average monthly salary a problem in your city?”
Impact of trade policies on housing affordability
It elaborates on how increased tariffs on steel and potentially lumber—stemming from the aggressive trade policies adopted by the United States this year—are anticipated to elevate development costs, further straining an already limited housing supply. Participants in this trade conflict may face economic losses that overshadow any potential benefits, according to the report. Consequently, rising inflation could adversely impact industries heavily dependent on imported materials, with construction being significantly affected.
Read more: Five Saudi cities shine on IMD Smart City Index 2024: Report
Economic growth vs. living costs
“While cities are engines of economic growth and attract significant talent, this very success often drives up living costs,” remarked Arturo Bris, Director of the WCC. “We observe a persistent gap between wage growth for many urban dwellers and the escalating price of housing, whether renting or buying.”
The report identifies key factors contributing to this trend, including gentrification in diverse neighborhoods, a shortage of newly constructed affordable units, and speculative investment patterns. Additionally, the crisis is particularly acute in urban areas due to increasing immigration influxes.
Shifts in city rankings
There have been minimal shifts in the rankings since last year among the top 20 cities. Notably, Taipei City fell from 16th place in 2024 to 23rd in 2025, while Ljubljana made a significant leap from 32nd to 16th.
A distinctive aspect of IMD’s report is its methodology, which avoids comparing cities at vastly different development stages; survey responses are rescaled based on their rankings in the Global Data Lab’s Subnational Human Development Index (SHDI).
The Chinese cities of Tianjin and Zhuhai did not meet the WCC’s stringent data sample requirements and, as a result, were not assessed this year.
The WCC defines a Smart City as one that achieves a harmonious balance among its economic capabilities (such as jobs and housing), applied technology, environmental considerations, and inclusiveness, all aimed at enhancing the quality of life for its citizens.
