Dubai property market to peak in 2025? Prices for high-end villas to stabilise
According to real estate consultancy ValuStrat, the property cycle in Dubai is coming to an end and prices in some segments will be under pressure this year, but will be stabilising. Nevertheless, a number of real estate officials predict a strong real estate market in 2025, supported by continuing demand and a still healthy supply and demand split.
Real estate consultancy ValuStrat in its annual report said: "Investors should pay close attention to the high-end villa location as the property cycle in Dubai nears a peak." It predicted that high-end villas would see slower sales price growth, with prices potentially stabilising in H2 2023.
Looking ahead, the residential market in Dubai will continue to trend up in 2025 but at a slower pace due to economic momentum, strong demand, positive sentiment and evolving maturity – ValuStrat
Not one to mince words, the consultancy said in its annual report that "Overall market growth is forecast to be moderate with capital values rising in the range of 5-10 percent throughout the year, a more tepid showing than in 2024.
Managing director, Driven Properties, Abdullah Alajaji said the sustained demand in luxury and off-plan properties seen last year will 'carry on' through to 2025. He said the increasing interest in off-plan properties is a sign of strong investor confidence in upcoming projects.
Mark Richards, The Network chief executive, stated that the Dubai real estate market is primed for solid acceleration in 2025, on the back of ongoing demand pressures combined with constrained supply in key segments.
Ready property demand rising
However, with the rising mortgage rates falling in 2023, more high-rent tenants entered the ownership segment, leading to a upward trend in ready-to-move-in property demand in 2024, said ValuStrat.
The demand for these affordable units also increased as repeated price hikes put properties out of the reach of some residents while the off-plan remained the focus of investor interest in the market.
Sales of ready-to-move-in homes increased by 12.3-per-cent and off-plan sales soared by 76.4-percent over 2023. "There was clear movement towards affordable apartments, with two in five ready sales consisting of units below D1 million," he said. According to Haider Tuaima, director and head of real estate research and advisory at ValuStrat: "It was a tenant driven trend, with many buying homes, as affordable borrowing costs followed three federal fund rate cuts in the second half of the year."
With rental prices heading upwards through 2024, demand for affordable housing has naturally risen, said Abdullah Alajaji, managing director, Driven Properties.
There was also quite an obvious movement towards smaller units in size which has been a hallmark of the market. The luxury property and off-plan markets continued to show strong demand, which we expect will extend all the way through 2025. An increased interest in off-plan properties suggests the investors are confident with new developments taking shape, which is a good omen for the market as we start the new year.
Apartment asking rents increased at double the pace of villas by the end of 2024 as ceilings began to be reached for some villa communities, the real estate consultancy said.
Also, more residents shifted into ownership due to less-expensive mortgage rates after the Central Bank of the UAE cut rates multiple times.
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