Firas Al-Msaddi, CEO of fäm Properties, issued a warning to investors, urging them not to rely solely on price correction forecasts in the Dubai real estate market based solely on new supply data. Recently, agencies such as Fitch and Moody's, as well as a number of other experts, have predicted a possible price correction of up to 15% by the end of this year or early 2026. However, Al-Msaddi believes that such forecasts, based solely on the number of new properties, can be misleading and emphasizes the need to base investment decisions on a broader set of market signals.
"Every few months, we see forecasts of an imminent drop in Dubai real estate prices based on one factor—new supply," Al-Msaddi noted. "Considering that tens of thousands of homes are scheduled for delivery in Dubai, they assume prices will fall." However, he emphasized that the real estate market is a much more complex system, where prices do not change in isolation from other factors. To properly understand market direction, he said, it is necessary to consider the combined effects of demand, liquidity, rental rate dynamics, and supply.
Al-Msaddi identified several key market signals that can serve as early warning signs of changes, even before they appear in official data. These include:
Increasing sales activity despite supply: Even with a large number of new properties, the steady growth in the volume of purchases and sales transactions indicates strong demand.
Sustainable investor demand due to attractive yields: Attractive returns on Dubai real estate investment continue to attract both domestic and international investors, supporting demand.
Active migration and population growth drive end-user demand: The constant influx of new residents and the city's overall population growth are increasing the need for housing among those planning to live in Dubai, not just invest.
Record-high rental rates drive purchase decisions: High rental rates make purchasing a more attractive alternative to renting, encouraging end users to purchase their own homes.
Therefore, Firas Al Msaddi urges investors to conduct a more comprehensive market analysis, considering not only the potential increase in supply but also other equally important indicators that shape the current state of affairs in the Dubai real estate market.
"Every few months, we see forecasts of an imminent drop in Dubai real estate prices based on one factor—new supply," Al-Msaddi noted. "Considering that tens of thousands of homes are scheduled for delivery in Dubai, they assume prices will fall." However, he emphasized that the real estate market is a much more complex system, where prices do not change in isolation from other factors. To properly understand market direction, he said, it is necessary to consider the combined effects of demand, liquidity, rental rate dynamics, and supply.
Al-Msaddi identified several key market signals that can serve as early warning signs of changes, even before they appear in official data. These include:
Increasing sales activity despite supply: Even with a large number of new properties, the steady growth in the volume of purchases and sales transactions indicates strong demand.
Sustainable investor demand due to attractive yields: Attractive returns on Dubai real estate investment continue to attract both domestic and international investors, supporting demand.
Active migration and population growth drive end-user demand: The constant influx of new residents and the city's overall population growth are increasing the need for housing among those planning to live in Dubai, not just invest.
Record-high rental rates drive purchase decisions: High rental rates make purchasing a more attractive alternative to renting, encouraging end users to purchase their own homes.
Therefore, Firas Al Msaddi urges investors to conduct a more comprehensive market analysis, considering not only the potential increase in supply but also other equally important indicators that shape the current state of affairs in the Dubai real estate market.
fäm Properties uses its advanced AI-powered data platform, DXBinteract, to monitor and analyze seven key market signals daily. This proactive approach allows them to provide investors with early alerts about potential price changes, ahead of these trends being reflected in official statistics.
Of these seven key indicators, the following are particularly significant:
Weakness in supply: The first sign of a potential price decline occurs when buyers begin to reject current prices. This is reflected in increased negotiations, counteroffers, incentives (free services, flexible payment plans), discounts, and promotions. These phenomena occur before changes are reflected in official sales data.
Duration on Market (DOM): The DOM metric, which reflects the average time it takes to sell a property, is a sensitive indicator of changes in buyer activity. A rise in DOM indicates that properties are staying on the market longer, signaling a slowdown in demand. Conversely, a decline in DOM, indicating an acceleration in sales, suggests an upward trend in the market.
Sales Volume Trends: Sales volumes directly reflect the level of demand in the real estate market. While one weak month may be a fluke, three consecutive months of declining sales volumes indicate a significant trend change. A detailed analysis of sales volumes by property type, as well as a distinction between primary and secondary markets, provides a more accurate picture of market dynamics.
Inventory and Absorption Rate: If the supply of real estate grows faster than the market can absorb it, this can lead to downward price pressure. Warning signs in this case include months of increasing supply, increased listing activity for new properties, and sluggish absorption despite promotions.
Yield Compression: When real estate prices rise faster than rents, yields decline. If yields become too low, investors may pause their investments, slowing capital growth until yields recover to acceptable levels. Rent-Price Misalignment: This indicator helps determine whether a market is overheated or undervalued by analyzing the relationship between real estate price movements and rental rate movements.
The combination of rising real estate prices and stagnant or declining rents should be of particular concern to investors, as it indicates potential speculative risk. In such a situation, investors may find themselves in a situation where the value of their investments is rising but they are not receiving corresponding rental income, which reduces profitability and increases the likelihood of losses in the event of a market correction. Conversely, if rents are rising and real estate prices remain stable, this indicates high profitability potential and favorable conditions for asset acquisition.
Housing affordability for the end consumer is directly linked to the cost of mortgage financing and overall market liquidity. An increase in mortgage interest rates or a tightening of lending conditions significantly reduces purchasing power, which inevitably leads to a decline in demand. Investors should closely monitor indicators such as average mortgage rates, loan volumes, and loan-to-value ratios to assess current market liquidity and anticipate potential future trends.
Al Msaddi noted that the Dubai real estate market, like all others, is subject to cyclical patterns. However, he emphasizes that investors can successfully counter these cycles by closely monitoring key market indicators. Proactive analysis and forecasting changes allow them to make informed decisions and avoid negative consequences, staying ahead of prevailing trends and protecting their investments.
Of these seven key indicators, the following are particularly significant:
Weakness in supply: The first sign of a potential price decline occurs when buyers begin to reject current prices. This is reflected in increased negotiations, counteroffers, incentives (free services, flexible payment plans), discounts, and promotions. These phenomena occur before changes are reflected in official sales data.
Duration on Market (DOM): The DOM metric, which reflects the average time it takes to sell a property, is a sensitive indicator of changes in buyer activity. A rise in DOM indicates that properties are staying on the market longer, signaling a slowdown in demand. Conversely, a decline in DOM, indicating an acceleration in sales, suggests an upward trend in the market.
Sales Volume Trends: Sales volumes directly reflect the level of demand in the real estate market. While one weak month may be a fluke, three consecutive months of declining sales volumes indicate a significant trend change. A detailed analysis of sales volumes by property type, as well as a distinction between primary and secondary markets, provides a more accurate picture of market dynamics.
Inventory and Absorption Rate: If the supply of real estate grows faster than the market can absorb it, this can lead to downward price pressure. Warning signs in this case include months of increasing supply, increased listing activity for new properties, and sluggish absorption despite promotions.
Yield Compression: When real estate prices rise faster than rents, yields decline. If yields become too low, investors may pause their investments, slowing capital growth until yields recover to acceptable levels. Rent-Price Misalignment: This indicator helps determine whether a market is overheated or undervalued by analyzing the relationship between real estate price movements and rental rate movements.
The combination of rising real estate prices and stagnant or declining rents should be of particular concern to investors, as it indicates potential speculative risk. In such a situation, investors may find themselves in a situation where the value of their investments is rising but they are not receiving corresponding rental income, which reduces profitability and increases the likelihood of losses in the event of a market correction. Conversely, if rents are rising and real estate prices remain stable, this indicates high profitability potential and favorable conditions for asset acquisition.
Housing affordability for the end consumer is directly linked to the cost of mortgage financing and overall market liquidity. An increase in mortgage interest rates or a tightening of lending conditions significantly reduces purchasing power, which inevitably leads to a decline in demand. Investors should closely monitor indicators such as average mortgage rates, loan volumes, and loan-to-value ratios to assess current market liquidity and anticipate potential future trends.
Al Msaddi noted that the Dubai real estate market, like all others, is subject to cyclical patterns. However, he emphasizes that investors can successfully counter these cycles by closely monitoring key market indicators. Proactive analysis and forecasting changes allow them to make informed decisions and avoid negative consequences, staying ahead of prevailing trends and protecting their investments.