Dubai residential real estate prices will face a moderate correction in the second half of 2025 and 2026 after peaking this year, said Fitch Ratings in its latest report.
“We expect prices will not fall more than 15 percent with banks and homebuilders in the UAE able to absorb the lower prices, which will protect them from rating downgrades,” the report added.
Supply growth to outweigh population rise
Prices of residential units increased by about 60 percent from 2022 to Q1 of 2025, with demand underpinned by immigration in the post-pandemic years, coupled with the improved attractiveness of the Dubai property market for investors in a healthy economic environment.
Dubai launched a record number of projects in 2024, with an estimated 150,000 units, up from about 100,000 in 2023. About 75 percent of ongoing projects are less than 20 percent complete. The spike in deliveries is expected in 2026, when about 120,000 units are planned for handover (compared to 30,000 in 2024 and 90,000 in 2025). This rate of project delivery rollout will test the absorption rate of the Dubai residential real estate market in 2026–2027.
Rising deliveries will lead to a record increase in supply, while a “natural” demand will lag. Indeed, the stock of residential supply could grow on average by 16 percent over 2025–2027, assuming no delays in deliveries, compared with forecasted population growth of 5 percent.
However, judging by the previous completion rates of some major projects in Dubai, there could be delays in deliveries, which would smooth the rise in real estate supply. Over 2022–2024, 174,000 units were projected to be delivered, while the actual new supply was 97,000 units, a completion rate of only 56 percent.
Rental yields to face pressure
Dubai’s population has risen by 0.4 million since 2021 to about 3.9 million, while the government’s target is 7.8 million residents by 2040 under the Dubai 2040 Urban Master Plan. Quarterly signed rent contracts grew by 30 percent in 2022–2023 but stabilized at around 170,000 in 2H24–1Q25 as the rise in population has been largely absorbed. Rent prices in most areas showed signs of stabilization in Q1 2025 after three years of high growth, correlating with unit prices.
The average gross rental yield on Dubai residential real estate declined by about 30 basis points in 2H24–1Q25, though it remains healthy at about 7.4 percent.
“We believe rent rates will be under pressure in 2025 and 2026 due to the large pipeline of projects, and lower rent prices will pressure asset prices as well,” Fitch added.
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Assets in prime locations to remain more resilient
The UAE property market performed strongly in 2022–2024, with sales volumes and unit prices underpinned by the improved economic environment and population growth. Fitch anticipates that the regulator will continue to have a significant role in managing the type and influx of new units into the market, which will be a crucial factor in stabilizing real estate prices during the downturn.
Delays in deliveries of some projects are possible, given low completion rates to date and the previous record of smoothening supply. Furthermore, assets in prime locations will remain more resilient to a potential correction, given a different typical investor profile with generally longer holding periods and higher tolerance for price swings.
Rated UAE homebuilders and banks have reasonable cushions to tolerate the forecast level of falling prices, given the improved leverage at homebuilders. This, in turn, resulted in lower levels of real estate financing at banks, which is also coupled with improved capital cushions coming from strong profitability.
