Last updated: May 30, 2025 | 14:46
Dubai: Dubai’s red-hot property market is poised for a moderate correction starting in the second half of 2025, according to Fitch Ratings. However, the anticipated price drop—estimated at no more than 15%—is not expected to destabilize the market or impact the credit ratings of UAE banks and homebuilders.
What’s driving the expected price dip?
After a surge of nearly 60% in residential property prices between 2022 and Q1 2025, driven by strong immigration and investor demand, Dubai is set to see a significant influx of new housing units. Approximately 250,000 units are slated for delivery between 2023 and 2026, with a peak of 120,000 units expected in 2026 alone.
This substantial increase in supply is projected to outpace the city’s population growth, which is forecasted at around 5% annually. As a result, rental growth rates have already begun to decline, dropping by 30 basis points to an average of 7.4% between the second half of 2024 and Q1 2025.
Impact on UAE banks, developers
Despite the anticipated price correction, Fitch Ratings believes that UAE banks and homebuilders are well-equipped to handle the downturn. Improved leverage ratios among developers and reduced real estate exposure in bank loan portfolios have strengthened their financial positions. Additionally, robust profitability has bolstered capital buffers, providing a cushion against potential losses.
What this means for homebuyers, investors
For prospective homebuyers, the expected price moderation could present an opportunity to enter the market at more favorable rates. However, it’s important to note that prime locations like Palm Jumeirah and Downtown Dubai may remain resilient due to their desirability and limited supply.
Investors should also consider that while a correction is anticipated, the market is not expected to experience a significant crash. The underlying fundamentals—such as ongoing population growth and economic diversification—continue to support long-term demand in Dubai’s real estate sector.
Looking ahead
As Dubai’s real estate market transitions into a new phase, stakeholders—including homebuyers, investors, banks, and developers—should prepare for a period of adjustment. While the days of rapid price appreciation may be behind us, the market’s stability and resilience suggest that it remains a viable environment for investment and growth.
