Fitch Ratings expects Dubai’s strong property market growth to slow down by the second portion of 2025. Even so, the possible 15% decrease is presumed to have a neutral effect on the UAE’s market and the credit ratings of local banks and building companies.
What is Causing the Projected Decrease in Prices?
Since prices for residential properties in Dubai grew by about 60% due to many immigrants and investors, the city is planning to build many new homes. Between the years 2023 and 2026, around 250,000 units will be delivered and around 120,000 will be delivered next year alone.
The large increase in supply is set to exceed the city’s population growth by about 5% per year. Because of this change, rental growth rates have begun to fall, with an average decrease of 30 basis points to 7.4% between the second half of 2024 and Q1 2025.
Effect on UAE Banks and Developers
Despite the projected price adjustment, Fitch Ratings thinks the decline in prices will not seriously impact the UAE banks and homebuilders. Banks are now more protected because of the improved balance between assets and debt for developers. Moreover, strong profits have increased capital reserves which can help to handle the losses.
How this Affects Homebuyers and Investors
Reduced home prices in the future could open a way for people to buy at better prices. Even so, top locations in Dubai like Palm Jumeirah and Downtown Dubai may maintain stability due to strong demand and limited supply.
Although a market correction is expected, it is unlikely that a major crash will happen. Factors like population growth and economic diversification continue to keep the real estate sector growing in Dubai for the long run.
Moving Forward
With a new phase in Dubai’s real estate market, homebuyers, investors, banks and developers must consider the transition they are about to go through. Because swift rises in values are less common now, the enduring strength of the real estate market says it is still a good place for investing and profiting.
