Dubai rents: Over 200,000 new units to keep prices under pressure in 2025-26

Rents will remain under pressure in Dubai in 2025 and 2026 due to the massive supply of over 200,000 units hitting the market and testing the absorption of the local property market, according to Fitch Ratings.

“Rent prices in most areas showed signs of stabilisation in the first quarter of 2025 after three years of high growth, correlating with unit prices… “We believe rent rates will be under pressure in 2025 and 2026 due to the large pipeline of projects, and lower rent prices will pressure asset prices as well,” it said.

The global ratings agency analysts said that the average gross rental yield on Dubai residential property declined by about 30 basis points between the second half of 2024 and to first quarter of 2025, though remains healthy at about 7.4 per cent.

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“While a real estate crash of a magnitude close to the 2008 crisis is not expected, the drop in rental yields and rise in supply are likely to lead to a moderate price correction. The magnitude of the correction will depend on the readiness of investors to accept lower rental yields, and would be likely to be larger if interest rates remain higher for longer,” said Fitch analysts.

The property market in Dubai crashed during the 2008-09 financial crisis as the UAE and global economy took a massive hit due to the Lehman Brothers crisis.

Following the delivery of 30,000 units in 2024, the Dubai property market is projected to see 210,000 new units coming into the market in two years — 90,000 in 2025 and 120,000 in 2026.

The UAE-based real estate consultancy said the Dubai rental market is showing increasing stability, with first-quarter growth for average apartment and villa rates moderating to zero per cent and 1 per cent, respectively.

“Whilst this indicates a restraint from previous trends, year-on-year growth remains positive at 9 per cent for apartments and 7 per cent for villas, reflecting healthy underlying demand,” it said, adding that certain areas continued to see rental appreciation, often supported by limited new inventory or the introduction of higher-quality residential offerings.

“In contrast, other localities experienced market adjustments, influenced by the arrival of new supply and residents increasingly prioritising affordability in their housing choices.”

The Smart Rental Index, introduced by the Dubai Land Department (DLD) in early 2025, is proving instrumental in promoting rental price stability.

Looking ahead, real estate firm Asteco anticipated further adjustments to the rental market dynamics.

“Despite supply constraints in established communities with limited new development, the market is actively expanding, marked by a significant influx of newly delivered residential units and a considerable future supply pipeline. This growing inventory is likely to foster a more balanced environment, potentially moderating rental increases and providing greater options for residents,” it said.