Developers in Dubai may face the risk of rising construction costs and delays as building works are outsourced and a large pre-sales pipeline is slated for completion over the next two to three years, Moody’s said in a report.

However, the emirate’s property market has remained strong as of mid-2024 and continues to be supported by a growing population and a shortage of ready-built properties.

Average sales prices for residential properties rose 21 percent over the 12 months ended June 2024.

“We expect shortages to remain until 2027, with prices starting to stabilise or slightly decline over the next 12 to 18 months,” the report said.

Moody’s said it was sufficient for developers, such as Damac, to maintain a land bank with only around two years of planned sales.

“We believe this is sufficient in Dubai, where new plots frequently become available for purchase and reduces the requirement for debt-funded investments in land,” the report said.

Additionally, the ongoing construction projects can be funded through customer prepayments from pre-sold units, with companies managing liquidity prudently, avoiding reliance on external funding sources.

Read more: Dubai developer Samana invests $41mln in new contracting arm

(Editing by Anoop Menon) (anoop.menon@lseg.com)

Subscribe to our Projects' PULSE newsletter that brings you trustworthy news, updates and insights on project activities, developments, and partnerships across sectors in the Middle East and Africa.