Dubai residential real estate prices will face a “moderate correction” in H2 2025-2026 after peaking this year, Fitch Ratings said in new report.
Fitch Ratings said it expects banks and homebuilders in the UAE able to absorb any lower prices, which will protect them from rating downgrades.
Prices of residential units increased by about 60 per cent between 2022 and Q125 with demand underpinned by population growth in the post-pandemic years coupled with the improved attractiveness of the Dubai property market for investors in the healthy economic environment.
Dubai real estate price forecast
This is against the backdrop of a record number of new property projects in 2023-2024, which are expected to release about 250,000 units.
A spike in deliveries in Dubai is expected in 2026, when about 120,000 units are planned for handover, compared to:
- 2024: 30,000
- 2025: 90,000
The handover of new units will lead to a record increase in supply.
Fitch Ratings said: “We estimate an average 16 per cent increase in supply in 2025-2027, exceeding forecast population growth of around 5 per cent.
“Meanwhile, the average residential rental yield declined by 30bp in 2H24-1Q25 (albeit to a still heathy level of 7.4 per cent) and we expect higher supply will put a further pressure on rental yields”.
The financial analysts added: “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”.
