The real estate market in Dubai is set to enter a "moderate correction” in the second half of 2025 because of a record number of project launches, Fitch Ratings has said.
The correction – a phase in which price of an asset declines by 10 per cent or more – would run through 2026, but is not expected to exceed 15 per cent, as the strength of the prime real estate segment will support the rest of the market, the New York-based ratings agency said in a research note on Thursday.
While corrections that can last from days to months or longer could devalue asset prices and value of investment portfolios in the short term, they are also an opportunity for buying new assets at lower values.
Real estate prices in the emirate, the commercial and financial hub of the Middle East, have leapt by about 60 per cent from 2022 to the first quarter of 2025, Fitch data showed.
The market has maintained a robust momentum after bouncing back from the Covid-driven slowdown and its world-beating run was supported by government measure including multiple visa options for investors and policy measures that boosted ease of doing business in the emirate.
Over the past few years, there have been a record number of new property launches, which in turn will double unit deliveries in 2025 and 2026 compared to 2022 to 2024, "which could cause a price correction”, analysts at Fitch said.
"Assets in prime locations are more resilient to downturns and investor appetite for these assets, with longer investment horizons, should underpin their valuations. Delays in project completion might also alleviate pricing pressure,” Fitch said.
However, the ratings agency expects that banks as well as developers will be able to "tolerate” falling real estate prices, with the former in particular having a "solid ability to tolerate risks”, as banking sector exposure to property sectors fell to 14 per cent of total gross loans at the end of 2024, compared to 20 per cent at the end of 2021.
Despite the reduction in lending portfolio exposure, real estate still 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 loans ratios at some of rated banks, we do not expect a sector-wide asset quality deterioration”, Fitch added.
Homebuilders, on the other hand, remain well funded, giving them a buffer to withstand a price correction as they have "reduced execution risk and have favourable pre-sales models, supported by robust order backlogs”, providing cash flow visibility, Fitch said.
Sustained demand from a growing population and heightened investor interest are driving property sales in Dubai. The property market has also been benefiting from government initiatives, such as residency permits for retired and remote workers, expansion of the 10-year golden visa programme and overall growth in the UAE’s economy on diversification efforts.
Real estate prices in Dubai rose above their 2014 historical peak in early 2024 on high oil prices and regional political instability.
Abu Dhabi's prices, meanwhile, rose by 21 per cent since the pandemic, although they remain below 2014 levels. Other emirates also recorded increases since the pandemic, but considerably less compared to Dubai.
Dubai launched a record number of projects in 2024, resulting in a supply of an estimated 150,000 units, half more than 100,000 in 2023. Deliveries would spike in 2026, when about 120,000 units are planned for handover, compared to 30,000 in 2024 and 90,000 in 2025.
"This rate of project delivery roll-out will test the absorption rate of the Dubai residential market in 2026–2027,” Fitch analysts said.
While Fitch estimates a prices correction, Betterhomes among the biggest property brokerages in the emirate expects rising interest from buyers.
The move to impose sweeping global tariffs by US President Donald Trump is unlikely to affect prices in the UAE real estate market, Betterhomes said a separate report.
Interest is coming from US and Chinese investors, "signalling a renewed appetite for Dubai real estate as a stable and strategic investment destination”, said Louis Harding, chief executive of Betterhomes.
The sustained momentum of the emirates' economy, its strong tourism sector, high public spending and diversification efforts that continue to mitigate external risks, also add to the appeal of Dubai's property market, according to Betterhomes's report.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Nepotism is the name of the game
Salman Khan’s father, Salim Khan, is one of Bollywood’s most legendary screenwriters. Through his partnership with co-writer Javed Akhtar, Salim is credited with having paved the path for the Indian film industry’s blockbuster format in the 1970s. Something his son now rules the roost of. More importantly, the Salim-Javed duo also created the persona of the “angry young man” for Bollywood megastar Amitabh Bachchan in the 1970s, reflecting the angst of the average Indian. In choosing to be the ordinary man’s “hero” as opposed to a thespian in new Bollywood, Salman Khan remains tightly linked to his father’s oeuvre. Thanks dad.
BOSH!'s pantry essentials
Nutritional yeast
This is Firth's pick and an ingredient he says, "gives you an instant cheesy flavour". He advises making your own cream cheese with it or simply using it to whip up a mac and cheese or wholesome lasagne. It's available in organic and specialist grocery stores across the UAE.
Seeds
"We've got a big jar of mixed seeds in our kitchen," Theasby explains. "That's what you use to make a bolognese or pie or salad: just grab a handful of seeds and sprinkle them over the top. It's a really good way to make sure you're getting your omegas."
Umami flavours
"I could say soya sauce, but I'll say all umami-makers and have them in the same batch," says Firth. He suggests having items such as Marmite, balsamic vinegar and other general, dark, umami-tasting products in your cupboard "to make your bolognese a little bit more 'umptious'".
Onions and garlic
"If you've got them, you can cook basically anything from that base," says Theasby. "These ingredients are so prevalent in every world cuisine and if you've got them in your cupboard, then you know you've got the foundation of a really nice meal."
Your grain of choice
Whether rice, quinoa, pasta or buckwheat, Firth advises always having a stock of your favourite grains in the cupboard. "That you, you have an instant meal and all you have to do is just chuck a bit of veg in."
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
The biog
Hobby: Playing piano and drawing patterns
Best book: Awaken the Giant Within by Tony Robbins
Food of choice: Sushi
Favourite colour: Orange
Essentials
The flights
Etihad (etihad.ae) and flydubai (flydubai.com) fly direct to Baku three times a week from Dh1,250 return, including taxes.
The stay
A seven-night “Fundamental Detox” programme at the Chenot Palace (chenotpalace.com/en) costs from €3,000 (Dh13,197) per person, including taxes, accommodation, 3 medical consultations, 2 nutritional consultations, a detox diet, a body composition analysis, a bio-energetic check-up, four Chenot bio-energetic treatments, six Chenot energetic massages, six hydro-aromatherapy treatments, six phyto-mud treatments, six hydro-jet treatments and access to the gym, indoor pool, sauna and steam room. Additional tests and treatments cost extra.
The specs
- Engine: 3.9-litre twin-turbo V8
- Power: 640hp
- Torque: 760nm
- On sale: 2026
- Price: Not announced yet
