According to the latest analysis by Fitch Ratings, residential property prices in Dubai are anticipated to undergo a moderate market correction during the second half of 2025 through 2026, following a peak in valuations in 2024.
Financial Sector Prepared for Price Shifts
Fitch noted that UAE-based banks and real estate developers are well-positioned to absorb potential price declines, thereby avoiding any immediate pressure on their credit ratings. The institutions’ financial resilience is supported by improved capital structures and prudent lending strategies.
From 2022 to Q1 2025, residential property prices surged by approximately 60%, a trend driven by sustained population growth in the post-COVID period and heightened investor interest in Dubai’s real estate sector, which continues to benefit from the emirate’s strong economic fundamentals.
Supply Surge Expected to Cool Price Growth
The report highlights that 2023 and 2024 witnessed an unprecedented number of new real estate projects, with a total of 250,000 new units expected to enter the market. This upward trend in supply is anticipated to culminate in 2026, with the handover of roughly 120,000 units, compared to:
- 30,000 units in 2024
- 90,000 units in 2025
This substantial increase in inventory is likely to outpace population growth and place downward pressure on both sale prices and rental yields.
Fitch projects a 16% average rise in housing supply during 2025–2027, significantly exceeding the expected population growth rate of around 5%. In parallel, average rental yields dipped by 30 basis points between H2 2024 and Q1 2025, though they remain robust at 7.4%.
The agency warns that rental yields may face further pressure as supply continues to grow, though the market may experience delays in some project completions, reflective of historically low delivery rates and efforts to manage supply absorption more effectively.
Prime Locations Likely to Withstand Volatility
Despite the anticipated correction, properties in Dubai’s prime areas are expected to show greater resilience, supported by a more stable investor base characterized by longer-term investment horizons and greater risk tolerance.
Solid Financial Buffers for Developers and Banks
Fitch concludes that rated UAE developers and financial institutions possess sufficient buffers to manage the projected price softening, aided by enhanced leverage metrics and a reduction in real estate exposure within bank loan portfolios. Strengthened capital reserves, driven by strong profitability, also contribute to the sector’s overall stability.
Source: https://www.arabianbusiness.com/industries/real-estate/dubai-real-estate-price-forecast-amid-increased-supply-fitch-ratings
