After a prolonged period of significant growth, Dubai’s residential real estate prices are likely to experience a double-digit percentage fall, according to a new report by Fitch Ratings. The agency anticipates this moderate correction will occur in the latter half of 2025 and into 2026, following a peak expected this year.
Fitch noted that residential unit prices in Dubai have surged by approximately 60% between 2022 and the first quarter of 2025. This boom was fueled by strong demand driven by post-pandemic immigration and Dubai’s increased attractiveness to investors within a healthy economic environment.
However, this period of rapid growth coincides with a record number of new property projects launched in 2023-2024, expected to release around 250,000 units into the market. The peak of these deliveries is projected for 2026, with an estimated 120,000 units slated for handover, compared to 30,000 in 2024 and 90,000 in 2025. Fitch estimates an average 16% increase in supply between 2025 and 2027, which will outpace the forecast population growth of around 5%.
This surge in supply is expected to put downward pressure on prices. While the average residential rental yield declined slightly by 30 basis points in the latter half of 2024 and the first quarter of 2025 (to a still healthy 7.4%), Fitch anticipates further pressure on rental yields due to the increased availability of units.
Despite the forecast correction, Fitch believes that the fall in prices will likely be contained to a maximum of 15%. The agency also suggests that UAE banks and homebuilders have sufficient buffers to absorb these lower prices, which should protect them from rating downgrades. Furthermore, properties in prime locations are expected to remain more resilient to this potential correction due to different investor profiles with longer holding periods and higher tolerance for price fluctuations.
Summary:-
- Fitch Ratings predicts a double-digit percentage fall in Dubai’s residential real estate prices in the second half of 2025 and 2026 after a period of significant boom.
- The anticipated price correction is attributed to a record number of new property deliveries expected to outpace population growth.
- Despite the expected fall, Fitch believes the decline will likely be limited to 15%, with banks and homebuilders having adequate buffers.
- Properties in prime locations are expected to be more resilient to the price correction.