Dubai Property Market Faces Rebalancing After Four-Year Rally
Dubai’s real estate market, which has enjoyed an exceptional rally over the past four years, is entering a new phase. Global ratings agencies Moody’s and Fitch forecast a market rebalancing within the next two years as a record influx of new housing supply converges with a moderating pace of demand growth. Despite nearly 60% price growth between 2022 and early 2025, analysts stress the adjustment will be orderly rather than disruptive.
Wave of New Supply Meets Slower Demand
Moody’s projects more than 150,000 new homes will be delivered between 2025 and 2027, representing about 20% of Dubai’s current housing stock. Fitch forecasts an even sharper surge of nearly 250,000 units in the same period, including 120,000 set for handover in 2026 alone. With supply projected to rise by 16% against an expected population increase of only 5%, both agencies anticipate cooling in prices of up to 15%.
Demand Fundamentals Remain Resilient
Despite the looming oversupply, demand drivers remain robust:
- Dubai’s population crossed four million in 2025, growing 6% in just one year.
- Over 80,000 millionaires now reside in the emirate, driving demand for luxury real estate.
- Smaller household sizes and an influx of expatriate professionals are sustaining long-term housing needs.
- Luxury remains resilient — in Q1 2025 alone, more than 590 homes priced above Dh20 million were sold, underscoring the strength of the high-end segment.
Analysts expect the divergence between luxury and mid-market properties to widen: prime villas and townhouses will better retain value, while mid-market apartments may face downward price pressure.
Market Signals of Cooling
Signs of moderation are already visible. While prices for apartments and villas grew at double-digit rates in 2024, rental growth slowed significantly to 8.5% in May 2025, compared to over 21% a year earlier. Higher borrowing costs, mirroring US rate trends, are also dampening mortgage affordability, prompting more buyers to adopt a cautious approach.
Safeguards Strengthening the Market
Unlike previous downturns, the current cycle is bolstered by financial and regulatory safeguards:
- Developers like Emaar hold record order backlogs of Dh129 billion, compared with Dh25 billion five years ago.
- Leverage among top developers has dropped significantly, from nearly 5x equity to just 1.4x.
- Profits of the six largest developers reached Dh46 billion in 2024, up from Dh12 billion in 2020.
- Escrow rules, stricter launch requirements, and buyer protection frameworks in Dubai, Abu Dhabi, and Sharjah reduce project risk.
Meanwhile, banks have reduced exposure, with corporate real estate lending down by Dh66 billion between 2022 and 2024, lowering systemic risks.
Implications for Buyers, Tenants, and Investors
The adjustment phase is expected to create opportunities and challenges across the market:
- Buyers: Will benefit from increased choice and stronger bargaining power as supply peaks.
- Tenants: Likely to see rental stabilisation, especially in mid-market apartments.
- Investors: Must adopt a selective approach, focusing on premium segments for stability while avoiding oversupplied zones with thinner yields.
Outlook: From Momentum to Maturity
Real estate consultants agree the market is unlikely to collapse despite oversupply pressures. Instead, Dubai’s property sector is transitioning from years of relentless price growth to a period of measured rebalancing. The challenge lies in absorbing the glut of units due by 2026 without undermining investor confidence. The opportunity, however, is the creation of a more transparent and stable ecosystem that sustains residents and global investors alike over the long term.
Ultimately, this shift may mark Dubai’s evolution into a more mature property market — one that balances rapid growth with stability, making it a sustainable global investment hub.
