Dubai’s world-beating property rally shows signs of strain, reports Bloomberg

BLOOMBERG: Shiny new towers and villa communities will again spring up in Dubai this year as developers pile into one of the world’s biggest property booms. Yet there are growing signs that the record rally in prices is slowing.

Every week, builders are breaking ground on homes they say are selling out within days or even hours. But some, including Dubai’s largest developers Emaar Properties PJSC, are starting to see the need for more caution. The emirate’s property boom has already continued for several years, its longest rally since homeownership was first opened to foreigners in 2002.

“Our expectations are the market will still do well next year here and globally. There is a positive sentiment for business especially with Trump coming in,” Emaar founder and Managing Director Mohamed Alabbar said in December.

But Emaar is now growing more wary of raising prices too much because it could “kill the golden goose,” Alabbar said.

Dubai would need to keep attracting new residents to fill the homes being built. It also needs to provide affordable housing to avoid pushing expats out of the city at a time many are grappling with the global surge in inflation and rising costs of living.

New Millionaires

Already, nearly a fifth of Dubai’s homes are valued above $1 million, according to the property firm Knight Frank. It predicts that residential prices will rise an average 8 percent in 2025, moderating from the eye-popping 20 percent jump of the previous year.

Meanwhile, Dubai’s prime home prices will rise 5 percent this year, the firm predicts, topping London’s 2 percent and New York’s 3 percent.

Emaar – best known for building the world’s tallest tower – is set to complete 6,000 to 7,000 homes a year by the peak of 2026 and 2027, according to Bloomberg Intelligence.

Also read: Record transactions and new units: Dubai’s property market thrives

But Dubai’s rally is leaving many questioning the sustainability of a market where much of the new supply is sold via instalments ahead of construction. It’s a strategy that comes with risks because some buyers may not complete payments.

The strength of the US dollar, to which the United Arab Emirates has pegged its currency, also makes local property more expensive for many overseas buyers.

An influx of new residents including wealthy investors, crypto millionaires and rich Indians seeking second homes has helped drive up demand. Dubai’s population stood at 3.8 million in 2024, up from 3.66 million in 2023. Rents have also surged, pricing out many from their homes and helping drive residents into outskirts developments on the edge of the desert.

“The demand is still there but sales are slowing down as prices and rents have definitely hit a ceiling,” said a broker who specialises in high-end sales.

According to him sales are starting to slow especially in the off-plan market. Buyers of such homes purchased ahead of construction are having to reduce prices to sell before completion, with the median price falling down to 1,600 dirhams ($436) a square foot from 1,700 dirhams in 2023, according to data by the researcher REIDIN.

Party Goes On

For developers the good times are rolling on for now. “Real estate is a cyclical business and this cycle has got legs,” said a developer, adding the city and the country have got their act together, where they are offering the golden visas. They’re attracting business and international funds to move here.

Emaar is among the best barometers for the health of the market. Its profit in 2025 is likely to hit 13 billion dirhams as many developments under construction are completed, according to analyst estimates compiled by Bloomberg. That’s a surge from profits of about 3.8 billion dirhams in 2021.

Still, the steady supply of new homes has the potential to limit prices. Dubai’s property developers launched a record number of new housing developments in 2024, according to REIDIN, with a total of nearly 140,000 homes having been either started or announced by developers across 588 projects.