Though he sees the acquisition of the Chilean forward from Barcelona as "a big step in the right direction," the ex-England striker believes that the Gunners' rivals are stronger.
Optimism is high at Emirates Stadium following the Chile international's arrival from Barcelona as the club looks to improve on last season's fourth place finish.
While Owen acknowledged the forward's quality, the former England player believes that Arsene Wenger's side will struggle to qualify for the Champions League because of the strength of their rivals.
He told talkSPORT: "The signing of Sanchez has made everyone sit up and take note. I really do rate him, he's a top player and it's a big step in the right direction.
"But, in no particular order, my top four for next season would be Chelsea, Manchester City, Manchester United and Liverpool."
Brendan Rodgers's Liverpool was runner-up to City last season and Owen has warned his former side that it must improve if they wish to claim a first league title since 1990.
"If Liverpool are going to progress again, they probably need to get better again," the 34-year-old told the club's official website. "Manchester City won the league, Chelsea have strengthened in a big way. From second to first is a big leap so Liverpool are going to need to be better again and the top-line performers are going to need to play as well, if not better."
Liverpool has seen star man Luis Suarez depart for Barcelona, while England internationals Adam Lallana and Rickie Lambert have been among the Merseyside club's close-season recruits to date.
"They are two good buys," added Owen. "They were fantastic last year for Southampton and are proven in the Premier League.
"Lallana could be a star. He has done fantastically well, has great feet and lovely balance. I'm really looking forward to seeing him in the Liverpool shirt."