The Upcoming Surge in Dubai’s Residential Real Estate Deliveries

The Dubai residential real estate market is poised for significant shifts, particularly as we approach 2026, when a whopping 120,000 units are projected for handover. This represents an important inflection point for buyers, investors, and market analysts alike, as supply is set to increase dramatically in the coming years.

A Market on the Cusp of Correction

According to a recent report from Fitch Ratings, the residential real estate prices in Dubai are anticipated to experience a moderate correction in the second half of 2025 and into 2026. After hitting a peak in 2025, prices are expected to stabilize but may not drop more than 15%. It’s good news for banks and homebuilders in the UAE, as they are projected to manage this decline adeptly and avoid significant rating downgrades.

Supply vs. Demand: A Growing Disparity

Between 2022 and the first quarter of 2025, prices for residential units in Dubai soared by about 60%. This booming demand was fueled by a surge in immigration post-COVID and a favorable economic climate. However, Dubai’s ambitious construction plans have resulted in the launch of record numbers of real estate projects.

In 2024 alone, approximately 150,000 units are expected to enter the market, up from about 100,000 in 2023. However, it’s worth noting that around 75% of these ongoing projects are only partially complete—less than 20% finished. With a delivery spike in 2026, where 120,000 units are anticipated, the market may face challenges regarding absorption rates. The projected increase in housing stock could average 16% over the years 2025 to 2027, while the expected population growth is a mere 5%.

Historical Context: Risks of Delayed Deliveries

While the outlook seems promising with high delivery forecasts, historical data raises some concerns. Between 2022 and 2024, a total of 174,000 units were projected to be delivered, but the actual numbers reached only 97,000, leading to a completion rate of just 56%. This trend of delayed project completions could play a vital role in smoothing the rise in real estate supply, allowing for a more manageable transition in the market.

Rental Prices: Under Pressure

As of early 2025, Dubai’s population reached 3.9 million, fueled by aggressive initiatives to reach a target of 7.8 million by 2040 under the Dubai 2040 Urban Master Plan. Over the last couple of years, signed rental contracts surged by about 30%, but this trend has begun to stabilize recently. Rent prices have shown signs of leveling off after three years of high growth, correlating with the upward trajectory of unit prices.

Despite a decrease in average gross rental yields by around 30 basis points in the latter part of 2024 into early 2025, the yields remain robust at about 7.4%. However, Fitch forecasts that rental rates may face downward pressure due to the influx of new projects, further applying strain on asset prices.

Resilience in Prime Locations

Despite potential downturns, properties located in prime areas are expected to fare better amidst the anticipated correction. Seller profiles in these locations often include longer-term investors who are less susceptible to short-term market fluctuations. Furthermore, Dubai’s property market has experienced strong sales volumes and unit prices from 2022 to 2024 due to an improved economic environment and population growth.

Regulatory bodies in the UAE are anticipated to continue playing an integral role in controlling the flow and quality of new units entering the market, which can help stabilize real estate prices during any downslide.

Financial Resilience of Builders and Banks

UAE homebuilders and banks are better positioned to absorb the expected price corrections due to a solid financial foundation. Enhanced leverage among homebuilders and reduced levels of new real estate financing at banks pave the way for improved capital cushions stemming from strong profitability.

The coming years will undoubtedly present both challenges and opportunities in Dubai’s residential real estate sector. With a keen focus on how supply and demand dynamics evolve, investors and stakeholders are urged to remain vigilant and informed.