The number of luxury developments will reduce in 2025 as developers continue focusing on affordable and mid-market properties, S&P Global Ratings said. 

Even though luxury developments generate a higher margin, the market for luxury apartments remains relatively small in comparison, credit analyst Sapna Jagtiani said.

“We believe developers will adjust the property mix and size to offer more affordable apartments and villas,” she said, noting that the pace of new launches will slow over the next 12-24 months as current launch volumes appear unsustainable long-term.

While developers remain financially robust due to solid cash flow, S&P anticipates they will stay flexible in adjusting launches to meet evolving demand, emphasising smaller units when prices increase.

“In a weaker environment, we expect less established developers will start to ease payment plans to maintain sales figures,” Jagtiani noted.

Property prices are expected to remain stable over the next 18 months but decline afterward due to increasing supply. Jagtiani said a potential increase in supply could saturate the unfulfilled demand, leading to lower prices and rents.

The market expects residential supply stock to increase by 182,000 units from 2025 to 2026, given that the large number of properties presold over 2022-2023 will be delivered. This supply surge is substantial compared to the annual average of 40,000 units delivered between 2019 and 2023.

However, the real estate inventory absorption rate, among others, depends on the annual growth of Dubai’s population, which is expected to be 3.5 percent over 2025-2026 and investor demand.

The 2024 deliveries have lagged behind 2023 due to industry delays, such as construction capacity constraints, which may temporarily support higher prices, Jagtiani said.

“Yet we expect the residential real estate market will balance out by 2026 at the latest,” she said.

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

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