Dubai’s Real Estate Market: Signs of a Coming Correction
Dubai’s residential real estate market has experienced an extraordinary surge in prices recently, but according to Redmond Ramsdale, Head of Middle East Bank Ratings at Fitch Ratings, a moderate correction may be on the horizon. In a revealing interview with CNBC, Ramsdale articulated concerns that the rapid increase in property prices—up nearly 60% since late 2021—might not be sustainable.
Price Surge and Market Dynamics
The remarkable price growth has propelled current levels to about one-third above the previous market peak observed in 2014. This unprecedented escalation is attributed to a mix of factors including post-pandemic recovery, a series of visa reforms designed to attract foreign talent, and increasing investor interest.
However, Ramsdale suggests that the market is nearing its peak. He emphasized that after three years of robust expansion, the market is transitioning into a more mature phase. This evolution suggests that a moderate correction, with potential price slips of up to 15%, is likely over the next 18 months.
Supply Outstripping Demand
One of the primary catalysts for the anticipated correction is the influx of new residential properties expected in the coming years. A significant number of project launches in 2023 and 2024 is set to result in a historic level of housing unit handovers by 2025 and 2026. Ramsdale pointed out that this boom in supply would likely outpace the growth of Dubai’s population, which has already begun to decelerate after sharp increases during the pandemic.
In Ramsdale’s words, “Effectively, what we’re saying here is that supply will outstrip demand.” While the post-COVID period witnessed strong demographic growth propelled by reforms in residency and labor laws, that momentum appears poised to slow.
Macroeconomic Factors at Play
The landscape isn’t just influenced by local dynamics; global economic factors, notably subdued oil prices, also weigh heavily on the real estate market. Historically, real estate prices in Dubai have been closely linked to oil trends; however, this correlation has weakened. Nonetheless, current lower oil prices can dampen investor sentiment, particularly among buyers from Gulf Cooperation Council (GCC) countries whose economies heavily rely on hydrocarbon revenues.
Further complicating the picture is the noticeable cooling in the rental market. Following significant price increases since 2021, rental prices have stabilized in the first quarter of 2025. Ramsdale expressed that this stabilization indicates that the demand has been largely absorbed. Yet, he also noted a downward trend in gross rental yields, suggesting a shift in market dynamics.
Expectations for 2026
Even in light of these predictions, Fitch does not foretell a market crash. The anticipated price adjustments of up to 15% over 18 months would still keep property values significantly above pre-pandemic levels. Ramsdale described this realignment as a “natural” outcome after an exceptional growth phase driven by favorable factors like low interest rates, inflows of investment, and policy liberalization.
As Ramsdale succinctly put it, “We’re at the top of the cycle, and a correction is likely.” This suggests that stakeholders in the real estate sector will need to remain vigilant as the market prepares to enter a new phase characterized by cooling prices and increased supply.
The coming months will be pivotal for investors and real estate professionals alike as they navigate this changing landscape, assessing how smoothly the market can transition into its next chapter.
