Dubai Real Estate Price Forecast: A Market Reset, Not a Reversal!

In 2025, the Dubai real estate market will likely experience a cooldown in the growth of its property prices after a robust boom since the post-pandemic period, where the residential property prices surged by 60% between 2022 and early 2025.

Dubai is forecasted to witness a stabilization in prices following the rapid growth in the previous years. The city is projected to see a decline in prices of up to 15% by the second half of 2025 and in 2026. The key driver behind this change is the delivery of approximately 210,000 new housing units over the next two years, doubling the supply of the previous three years.

Dubai has recorded several project launches, which will lead to double-unit deliveries in the second half of 2025 and the coming year 2026 in comparison to the earlier years of 2022 to 2024. According to many sources and research, it is expected that the properties nestled in prime locations may be subject to a greater decline in prices, and the pricing pressure may deteriorate due to delays in project completions, if any. The handover of new units will lead to an estimated increase of 16% in supply in 2025-2027, exceeding the forecasted population growth of around 5%.

The Dynamics of Housing Deliveries

• Over 210,000 units under construction or near delivery, nearly double the average of 40,000 units/year from 2019–2022. 
• In 2024, Dubai introduced several projects with a supply of approximately 150,000 units, half as many as 100,000 in 2023.
• Deliveries will spike in 2026, when about 120,000 units are planned for handover, compared to 30,000 in 2024 and 90,000 in 2025.
• Key areas that are expected to witness the bulk of the supply include:

1. Dubailand
2. Jumeirah Village Circle (JVC)
3. Dubai South
4. Business Bay

• Non-prime areas are expected to see price stagnation or corrections due to oversupply.
• Prime and waterfront developments (Palm Jumeirah, Dubai Hills Estate, etc.) remain resilient due to limited land availability and exclusive demand.

Many statistics and data suggest that banks can endure the falling residential property prices, as they have a solid ability to tolerate risks. Banks are always well prepared in advance to deal with the changing prices and to keep up with Dubai's dynamic real estate market. While real estate remains the largest component in UAE banks, at the end of 2024, the banking sector's exposure to the property sector decreased to 14% of the total gross loans, compared to 20% at the end of 2021.

Despite the reduction in lending portfolio exposure, real estate remains the largest component of banks' loan books. However, while a drop in prices could lead to a moderate rise in stage 2 and 3 loan ratios at some of the rated banks, we do not expect a sector-wide asset quality deterioration.

There are various parameters and factors that directly or indirectly influence the prices of real estate properties. It is important to keep these factors in check to make sure that the prices in the economy are stabilized.

1. Location, Amenities, and Infrastructure 

The residential properties situated in prime and central positions of the city are more popular and therefore are valued at higher prices as compared to those in non-prime areas. Also, the set of amenities and the infrastructural development of the residences play an important role in determining the prices. 

2. Supply and Demand Gap

The primary factor that affects the prices of the properties is the demand and supply of the particular area.  As discussed above, the properties located in popular areas offering convenience and good quality development will be in more demand as compared to properties in non-central regions, so the prices of prices will also be higher in this area.

3. Interest Rates

The interest areas applicable in the particular area affect the property prices to a great extent. In the areas where the interest rates are low, it becomes comparatively easy to purchase or invest in residential properties, thereby leading to higher demand. On the contrary, in regions with high interest rates, it becomes difficult for buyers and investors to invest, therefore, the demand falls, which ultimately affects the prices of real estate properties.

4. Taxes and Government Policies

The taxes applicable to residential properties, such as property tax, also have a great effect on the value of the prices of the properties. High taxes can make it difficult for buyers to purchase properties, and thus, the prices go down. The government can implement various policies to make buying easier, such as reducing interest rates, introducing incentives for buyers, etc. These establishments influence the value of the overall real estate market and thus affect the prices.

Factors Influencing Property Prices in Dubai 2025

The Dubai real estate market is long known as the premium and luxurious market, attracting various global buyers and investors. Though deemed as a profitable and stabilized market, some instances and factors affect the property prices, and therefore affect the overall real estate market of Dubai.

Circular Flow Diagram of Factors Influencing Property Prices in Dubai 2025

• At present, Dubai is witnessing the development and delivery of a huge number of projects, which ultimately causes fluctuations in the pricing of residential properties. Primely located properties will experience a decline in their prices compared to the earlier high prices.
• Dubai is experiencing a robust demand for real estate property investments due to the growing population. It is expected that the population of Dubai will hit 4 million in the current year and will increase to approximately 6 million by 2030. This rise in the population is caused by the immigration of a wide range of people to Dubai, especially since the post-pandemic years, in search of better job opportunities, a more luxurious lifestyle, or to raise their standard of living.
• It is widely known that the Dubai real estate market is internationally popular and considered a profitable investment due to its high rental yields and capital appreciation. The ROI in some prime locations, such as Downtown Dubai, is 5%-6% for apartments, whereas in Palm Jumeirah it is as high as 21% for studio apartments. This high return on investment attracts many people to invest in this city, leading to a high volume of investments, which also affects property prices.
• All these factors lead to increased demand for properties in demand and thereby create a cycle leading to the increased development of projects to meet the increased demand from global buyers and investors. This increase in the number of property creations ultimately causes variations in the prices of the properties in the Dubai real estate market.

Let’s look at the short-term and long-term framework of the investment landscape of Dubai.

Short-term Disturbances

• After the 60% price growth from 2020 to 2024, it is now anticipated that the real estate market in Dubai is going to experience a cooling period in the second half of 2025 and 2026. 
• It is expected that due to oversupply risks, there are projections of an estimated drop in prices by 10%-15% through 2025-2026. 
• Moreover, with increasing price sensitivity, investors are becoming more conservative with entry points and tend to avoid over-leveraged or speculative purchases. 

Long-term Resilience

Despite the current scenarios and expected fluctuations, the underlying confidence and support remain strong due to:

• Zero capital gains tax, property tax, and income tax facilities provided by the Dubai government facilitate easy purchase of properties in Dubai.
•  Political stability and the business-friendly environment provided by Dubai make it a strong premium choice for many buyers and investors.
• The continuous influx of wealthy expatriates from all around the world, especially Europe, Russia, India, and China.
• Government-led mega and luxurious projects, such as Dubai South, Expo City, and Jebel Ali development, are expected to drive long-term demand, paving the way to the long-term success of the city for investments and migrations.

After years of rapid growth and development, the upcoming surge in housing supply will likely bring price moderation, especially in oversupplied and mid-market areas. However, this is not a collapse or setting the market in reverse gear, but a booster and healthy correction reflecting the maturing market responding to increased development activity. For investors, this is a time to be selective, strategic, and informed to capitalize on emerging opportunities while avoiding areas at risk.

Dubai’s evolution to become a top financial hub and a global investment destination continues. This renewed setup will further strengthen Dubai’s real estate market towards more sustainable and value-driven growth, not a downturn. Strategic and well-informed decisions will define success in this next chapter of Dubai’s real estate story.