Dubai's Real Estate Market Faces Potential Correction Amid Supply Surge

Dubai's real estate market, after experiencing a significant boom, is now poised for a moderate correction. Fitch Ratings projects a potential decline of up to 15% in residential property prices during the second half of 2025 and into 2026.

A Market at Its Peak

Between 2022 and early 2025, Dubai's residential property prices surged by approximately 60%, driven by strong demand from international investors attracted by the city's favorable tax policies, infrastructure development, and liberal visa regulations. 

Anticipated Correction Due to Oversupply

The anticipated price correction is largely attributed to a significant increase in housing supply. An estimated 210,000 new units are expected to be delivered over the next two years, doubling the number from the previous three years. This influx is projected to outpace population growth, leading to downward pressure on prices. 

Resilience in Prime Locations

Despite the overall market correction, properties in prime locations such as Palm Jumeirah and Downtown Dubai are expected to remain more resilient. These areas continue to attract long-term investors and end-users, mitigating the impact of the broader market downturn. 

Financial Sector Preparedness

Fitch Ratings notes that UAE banks and developers are well-positioned to handle the anticipated market correction. Banks have reduced their real estate loan exposure from 20% to 14% of total gross loans since 2022, and developers have improved their leverage ratios, providing a buffer against potential price declines. 

Government Initiatives for Sustainable Growth

The Dubai government has implemented measures to support the real estate sector, including consolidating state-owned developers and launching the D33 economic plan aimed at doubling the city's economic output and establishing Dubai as a top global financial hub. 

Conclusion

While Dubai's real estate market is expected to undergo a moderate correction due to oversupply, the sector's fundamentals remain strong. Strategic government initiatives, financial sector preparedness, and resilience in prime property locations suggest that the market is poised for sustainable growth in the long term.

For more insights into Dubai's real estate trends and investment opportunities, stay tuned to our blog for the latest updates.