Dubai realty pivots to long-term stability as market dynamics shifts

Khaleej Times

2 days ago

Dubai's real estate market is entering a pivotal stabilisation phase in 2025, signalling a maturing and sustainable investment landscape.
After a remarkable surge that saw residential property prices climb by approximately 60 per cent from 2022 to early 2025, driven by strong international demand, the market is now transitioning towards equilibrium.
This shift, as outlined by Asico, a leading Dubai-based real estate brokerage and developer, reflects a healthy evolution, offering investors a more predictable and strategic environment.
As of January 2025, the average price per square foot in Dubai's residential market stood at Dh1,484, marking a modest 0.57 per cent month-on-month decline. This subtle dip indicates a cooling from the frenetic price escalations of recent years, suggesting a market recalibrating for long-term stability. Despite this adjustment, transaction activity remains vigorous. In February 2025, Dubai recorded a 32 per cent increase in transaction volume and a 37 per cent rise in value compared to February 2024, totalling over Dh50 billion. This resilience underscores the emirate's enduring appeal as a global real estate hub.
A notable trend reshaping the market is the growing demand for mid-market and affordable housing. In 2024, two out of five ready home sales were valued at less than Dh1 million, a clear departure from the dominance of luxury properties. This broadening appeal reflects a more inclusive market, catering to a diverse buyer base and fostering sustainable growth. High-net-worth individuals continue to gravitate towards premium developments in areas like Palm Jumeirah and Downtown Dubai, where properties often exceed Dh5 million, but the rise of mid-tier options signals a market maturing beyond speculative frenzy.
The off-plan segment remains a cornerstone of Dubai's real estate dynamism, with a 38 per cent increase in transaction volume and a 60 per cent surge in value year-over-year in February 2025. Prime locations such as Dubai Creek Harbour, Mohammed Bin Rashid City, and Dubai Hills lead this charge, attracting investors with their blend of modern infrastructure and strategic positioning. Off-plan properties, often priced 10-20 per cent below ready homes, continue to entice buyers seeking capital appreciation and rental yields, which average 6-8 per cent annually in key areas, according to industry data.
On the supply side, developers are proactively addressing demand. In response to robust market activity, construction schedules are being accelerated, with handovers brought forward by three to six months. This agility aims to prevent potential shortages and maintain market balance.
However, ratings agency Fitch has cautioned of an impending price correction, projecting a double-digit decline in the second half of 2025 and into 2026. This forecast aligns with a planned delivery of 210,000 units in 2025 and 2026, nearly double the volume of the previous three years. Fitch estimates this supply surge could depress prices by up to 15 per cent, a sharp pivot from the post-pandemic boom.
Wail Abualhamail, director of Real Estate at Asico, views this stabilisation as a positive development. 'The current phase reflects a maturing market, shifting from speculative buying to strategic, long-term investments,' he said. 'This evolution signals investor confidence, enhanced regulation, and a sustainable future for Dubai's real estate sector.'
Property market experts said the stabilisation marks a new chapter for Dubai's real estate sector, one defined by resilience, diversity, and strategic growth. 'As the market matures, it continues to affirm its position as a global leader, offering investors a stable yet dynamic platform for long-term success,' a spokesman of a Dubai realty brokerage firm said.
Asico's insights highlight a market where quality, thoughtful planning, and prime locations are becoming the primary drivers of returns, moving away from short-term speculation.
The Dubai government's strategic initiatives further bolster this outlook. The Dubai Economic Agenda (D33), targeting a doubling of the emirate's economy by 2033, emphasises real estate as a key growth driver. Policies like the Golden Visa programme, which grants long-term residency to property investors, and 100 per cent foreign ownership in select sectors have cemented Dubai's status as a global investment destination. In 2024, the emirate attracted over Dh 300 billion in real estate investments, with 40 per cent from foreign buyers, according to Dubai Land Department data.
As Dubai's property market stabilises, investors face a landscape ripe with opportunity. The focus on mid-market properties broadens investment avenues, while sustained demand underscores the sector's long-term strength. For buyers, this phase offers a chance to make informed decisions in a more predictable environment, prioritising quality and location over speculative gains.