Dubai’s residential property prices expected to fall by 15%: Fitch Ratings

Dubai’s residential real estate prices will face a “moderate correction” in the second half of the year and in 2026, and could fall by as much as 15%, according to Fitch Ratings’ new report.

“We expect prices will not fall more than 15% with banks and homebuilders in the UAE able to absorb the lower prices, which will protect them from rating downgrades,” the report said.

Prices of residential units increased by about 60% between 2022 and the first quarter of 2025, the report said, with demand underpinned by immigration in the post-pandemic years coupled with the improved attractiveness of the Dubai property market for investors in a healthy economic environment.

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This is against the backdrop of a record number of new property projects in 2023-2024, which are expected to release about 250,000 units, it added.

The spike in deliveries is expected in 2026, when about 120,000 units are planned for handover, compared to only 30,000 in 2024 and 90,000 in 2025.

The handover of new units will lead to a record increase in supply, Fitch said, and it estimates an average 16% increase in supply in 2025-2027, exceeding forecast population growth of around 5%.

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Meanwhile, the average residential rental yield declined by 30bp in the second half of 2024 and early 2025 - “albeit to a still heathy level of 7.4%”.

“We expect higher supply will put a further pressure on rental yields,” it explained.

It also noted that assets in prime locations will remain more resilient to a potential correction, given a different typical investor profile with generally longer holding periods and higher tolerance for price swings.

Pakistanis are among the top five buyers of property in Dubai.