Signs of strain are emerging in Dubai’s runaway property market, which is weeks away from surpassing its longest ever bull run.
The stunning almost five-year growth in prices has been driven by sales of not yet built “off-plan” homes, as well as finished luxury villas and town houses. If prices keep climbing into October, the city will break its record of 57 straight monthly increases, according to data provider Reidin.
But rating agencies expect prices to start falling early next year as thousands of new units are finished every month. Would-be “flippers” are already struggling to offload unbuilt properties they bought with the aim of reselling unfinished for a quick profit, according to analysts and brokers.
The glut of new homes is “beginning to test the depth of demand”, data provider Property Monitor said, with 93,000 new units entering the market so far this year. There is high demand for villas and houses for wealthy families, but 95 per cent of the new properties were apartments.
Credit rating agency Moody’s said this month the total 150,000 homes expected to be finished between 2025 and 2027 “is likely to curb a five-year run of sharp price escalations”. It anticipated “a modest price correction starting in 2026”. Earlier this year, rating agency Fitch said it anticipated prices falling about 15 per cent.
Prices per square foot are 25 per cent higher than their previous peak in 2014, without adjusting for inflation. The boom has been fuelled partly by investors looking to benefit from lower prices than western cities — and by the low-tax entrepot’s swelling population.
“There will be a slowdown at some stage within certain segments,” said Chris Whitehead, managing partner of Dubai Sotheby’s International Realty, which sells luxury properties to very rich buyers. “There’s no real estate economy on the planet that continues up, up, up.”
Whitehead said he did not expect the top end of the market to be hit, but added that high supply at the low end is “where we get a risk in the future”.
One segment already cooling, data providers said, is flipping. Resales of unfinished units “have dropped considerably”, wrote Property Monitor in a note last month, warning that “quick resale gains before handover are never a sure thing”. Flipping had previously constituted about a third of the resale market, but that fell to 20 per cent in July, according to Property Monitor.
One investor hoping to sell an unfinished apartment on Dubai’s man-made Palm said he had not had a single interested buyer since listing the property three months ago.
Many speculative investors were sold “a false promise of easy money”, said Alec Smith, head of residential sales and leasing at Savills Dubai.
Off-plan resales work best if investors hold on to the property until it is finished, when it would attract buyers wanting a home to move into, he added: “I don’t think all brokers are honest with their clients and tell them that.”
Smith anticipated a “softening of prices” in areas with many new developments, where disappointed speculative investors may compete to offload flats.
Some brokers caution the flipping slowdown could be seasonal, as business fades during summer when rich residents escape the heat by holidaying abroad.
Dubai’s property market has been characterised by boom and bust since it opened to foreigners in the early 2000s, but international investors say they are confident it is more resilient this time around, thanks to regulatory reforms.
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