Dubai’s property market is poised to see the highest growth among major global cities in 2024, according to a report by UBS Global Real Estate Bubble Index released on Tuesday. However, concerns over high new supply could trigger a moderate price correction in the near term, experts caution.
The UBS report reveals that Dubai’s score in the Global Real Estate Bubble Index has risen from 0.14 in 2023 to 0.64 this year, moving the city up in the rankings from 23rd place last year to 14th in 2024. This marks a shift from a “fairly valued” market to a “moderate bubble risk” category, reflecting growing concerns about speculative activity and excess supply.
Dubai’s real estate sector has been on an upward trajectory for over three years, driven by a significant population increase of nearly 230,000 since early 2023. This surge in demand has contributed to rising property prices and rental rates across the emirate. In the last year alone, housing prices have climbed by almost 17%, according to UBS, and are now 40% higher than in 2020.
“After a seven-year price correction, the bubble risk signal in Dubai was low in 2020. Since then, transaction numbers have hit record highs each year, and excess supply has been absorbed,” UBS said in its annual report. “However, with a high proportion of speculative off-plan transactions and elevated new supply, a moderate price correction could occur in the short term.”
Other cities facing similar moderate bubble risks include Vancouver, Singapore, Madrid, and Sydney, according to UBS. Among these cities, Dubai recorded the strongest increase in its bubble risk score in 2024.
The demand for real estate in Dubai remains robust, with 104,250 transactions recorded so far in 2024, just 14,000 short of the total number of transactions in 2023, according to research by Emirates NBD. This surge is largely attributed to a boom in off-plan sales, with many new projects launching in previously underserved communities.
Despite the potential for a short-term correction, UBS predicts Dubai’s property market will continue to grow by over 5% annually through 2024, leading global cities like Warsaw, Miami, and Amsterdam in real estate price growth.
In August, Property Monitor reported that Dubai experienced its second-highest monthly property price growth during the current market cycle, with a 2.48% increase in just one month. This acceleration in prices is attributed to the influx of new off-plan projects and growing investor interest.
While the long-term outlook for Dubai’s property market remains strong, analysts are urging caution as speculative activity and rising supply could lead to a cooling of prices in the short term.