Real estate and rent prices in Dubai may begin to decline within about 18 months

Real estate and rent prices in Dubai are expected to be stable over the next 18 months, according to the forecast of S&P Global analysts. However, experts warn that after a stable period, as a result of an increase in supply, prices may begin to decline. It is expected that a significant number of new objects will enter the market, which in turn will lead to an increase in available housing units. Experts predict that in 2025-2026, about 182,000 new real estate units will enter the market, significantly exceeding the average supply of 40,000 units observed in previous years.

Despite the current increase in prices and rents in most areas of the city, market growth prospects depend on several factors, including the level of real estate absorption and population growth, which is expected to be approximately 3.5% in the coming years. An increase in the presence of available units, depending on the location, can also change the dynamics of the market: at first this will affect less popular areas before covered by more covered segments. Thus, the future of the real estate market in Dubai, although it promises stability, hides possible changes in conditions of increased supply. The future of the real estate market in Dubai, although it promises stability, hides possible changes in conditions of increased supply.

“However, still supplies in 2024 have not been keeping up with actions in 2023. Significant delays in delivery, which are not uncommon for the industry - often from the restrictions of the construction power - can tighten the market and support trends in raising prices, at least a shorter one. Nevertheless, we expect that the residential real estate market will be balanced, no later than 2026, ”Jagtiani said.

According to S&P Global, the population of Dubai is expected at 4 million people by 2026. Such an increase in population contributes to a high rent and significant investments in real estate in this region, which makes a square feet higher than in most European countries. In the first half of 2024, the number of transactions for the sale of new buildings twice the volume of the secondary market, which indicates that buyers are ready to pay a higher price for new designs. This confirms the growing interest in real estate investments and improving the quality of life in Dubai.

To further stimulate growth in the real estate market and attract foreign direct investment, Dubai launched an initiative called D33. This program is aimed at creating a more attractive environment for investors, which, in turn, can contribute to the further development of the city and increase its population. Thus, the real estate market in Dubai continues to be one of the most dynamic in the world.

S&P also notes that the Dubai economy remains relatively stable, despite the current geopolitical tension in the region. It is predicted that the real growth of gross domestic product (GDP) in Dubai in 2024-2027 will be about 3%, after reaching 3.3% in 2023. It is expected that GDP per capita in 2024 will reach approximately $ 38,000, which emphasizes the stability and positive trends in the economy of this emirate.

In recent months, there has been a slowdown in the pace of new launches of projects in the real estate market, which is associated with the saturation of the supply. Studies show that it is expected to reduce the pace of such planned launches over the next 12-24 months, despite the presence of significant cash reserves for many developers. This was the result of the ability of companies to adapt to changing market conditions and adjust their plans in response to demand. According to Sapna Jagtiani, it is flexibility in project management that will allow developers to successfully respond to changes in the economic environment and maximize the profit by selling more affordable units.

According to the Property Monitor report, in September there was a record level of new projects added to the market with the expected total value of more than 28.9 billion dirhams. During the first nine months of this year, almost 100 thousand new units with a total cost of more than 242.7 billion dirhams were launched. This exceeds the launch rate in 2023, which, however, does not guarantee the preservation of high indicators in the future, especially taking into account financial realities and weak demand for luxurious objects. S&P forecasts indicate that the share of the elite segment in the markets will be reduced, since the developers will focus on creating available objects, which emphasizes the need to adapt to the requirements of a wide audience.

Thus, the current dynamics of the development of the real estate market requires not only financial flexibility from developers, but also a strategic review of design and pricing approaches. It is expected that in the coming years, gradual switching to more affordable apartments and villas will become a determining trend, allowing developers to keep competitiveness in the conditions of a reducing demand for exclusive proposals. This emphasizes the need for a close analysis of the market situation and a proactive approach to the formation of a project portfolio.