Dubai’s property market is at a fascinating crossroads as it experiences a transformative phase after a remarkable four-year rally. Experts from global ratings agencies such as Moody’s and Fitch are predicting a much-anticipated market adjustment in the coming two years. This forecast comes on the heels of an unprecedented surge in housing supply, which is poised to meet the slowing pace of demand growth that has characterized the region.
Between 2022 and early 2025, residential values in Dubai soared nearly 60%. This surge has been driven by a confluence of factors, including significant foreign investments, rising affluence, and a surge in immigration, bolstered by new long-term visa reforms. However, the outlook is changing as both Moody’s and Fitch anticipate that a wave of new housing supply will bring about a rebalancing in the market.
Moody’s projects that over 150,000 new homes will be delivered in Dubai between 2025 and 2027, which amounts to about 20% of the current housing stock. Fitch’s analysts are even more optimistic, estimating nearly 250,000 units will enter the market within the same timeline, with a staggering 120,000 of those expected to be handed over in 2026 alone. This influx signals a significant 16% increase in supply, while the anticipated population growth is only about 5%. This imbalance is expected to cool the market, yet both agencies agree that the adjustment may be orderly rather than disruptive, with Fitch suggesting that price declines could hit a ceiling of around 15%.
Despite these forecasted changes, the fundamentals driving demand remain strong. Dubai’s population crossed the four million mark in 2025, reflecting a robust growth of six percent year-over-year. Factors like smaller household sizes and a burgeoning base of expatriate professionals, alongside a rising number of high-net-worth individuals—now exceeding 80,000 millionaires—are supporting ongoing demand for property. Notably, in the first quarter of 2025, more than 590 homes valued at over Dh20 million exchanged ownership, highlighting a booming luxury market.
The luxury segment appears more resilient as supply increases. High-end villas and townhouses are expected to retain their value much better than mid-market apartments, which may face more substantial downward pressure as new units flood the market. The gap between prime and mid-market properties could very well widen as the supply glut materializes.
Initial indicators of a cooling market are already apparent. Although property prices for apartments and villas continued to rise at double-digit rates in 2024, rental growth saw a notable decline, dropping to 8.5% in May 2025 from an over 21% increase the year prior. Additionally, pressures from rising interest rates akin to those in the U.S. are starting to limit mortgage affordability, nudging potential buyers into a more cautious stance.
One of the key differences between this current cycle and previous downturns lies in the resilience of developers and the safety mechanisms now ingrained in the system. Market leaders like Emaar boast order backlogs of Dh129 billion—significantly up from Dh25 billion just five years earlier. In addition, the average leverage among major developers has improved substantially, decreasing from nearly five times equity to just 1.4 times. The profitability of the top six players reached Dh46 billion in 2024, compared to Dh12 billion in 2020. Such metrics indicate a far more stable and reliable market environment.
Fitch’s analysis also shows banks are taking steps to reduce their exposure to potential risks. Between 2022 and 2024, corporate real estate lending balances fell by Dh66 billion, leading to a reduced share of corporate real estate loans in total domestic lending down to 14%, with mortgages contributing another 8%. This cautious de-risking of the financial sector minimizes the likelihood of systemic pressures if property values do decline.
The adjustment phase in the property market is likely to bring tangible benefits for residents and end-users. With supply peaking, buyers can expect increased choice and improved bargaining power, while tenants may see rental prices stabilize, particularly in the mid-market apartment segment. However, investors will find a more selective landscape, where premium properties provide stability but lower yields, and oversaturated areas necessitate more careful consideration before entering.
Real estate consultants are optimistic that despite the potential for a significant new supply, the market is unlikely to experience a collapse. Instead, the years of continuous price hikes are expected to transition into a period of rebalancing. The real challenge will be managing the influx of new units slated for delivery by 2026 without compromising investor confidence. This scenario offers an opportunity to foster a more balanced and transparent real estate ecosystem, ultimately benefiting both residents and global investors in the long run.
