Dubai’s Property Boom: House Prices Predicted to Rise Further in 2025
The Dubai property market is set to maintain its upward trajectory, with house prices forecasted to increase by 8% in 2025, driven by a persistent shortage of supply, according to Knight Frank’s latest report, Dubai Residential Market Review: Special Edition.
Record-breaking Growth in 2024
Property prices in Dubai are currently 19.9% higher than the same period last year, reflecting a surge in transactions throughout 2024. The third quarter alone saw 47,269 property deals, marking a record-breaking quarterly performance and a 41.8% increase from Q3 2023.
From January to September 2024, the total transaction value soared past AED 306.3 billion ($83.4 billion), up by 36% compared to the same timeframe in 2023. Q3 contributed AED 116.8 billion to this impressive figure, underscoring Dubai’s booming real estate sector.
“House prices in Dubai continue to be fuelled by relentless demand,” said Faisal Durrani, Partner and Head of Research, MENA at Knight Frank. He added, “The mainstream market has seen prices rise by 4.3% in Q3 alone, while city-wide prices have surged by nearly 20% compared to last year.”
Luxury Market on the Rise
Dubai’s luxury real estate sector is also thriving. Over the past 18 months, the proportion of high-end homes sold has tripled, with nearly 20% of all properties now valued at over $1 million. This highlights the growing demand for upscale housing, even amidst a constrained supply.
However, Knight Frank’s report suggests that the pace of price growth will moderate in 2025. While prime residential values increased by 6% over the past year, future growth is expected to align with a more sustainable 5%, building on the significant gains of recent years.
The Supply Challenge
Despite developers’ efforts to meet demand, Dubai faces ongoing supply constraints. An estimated 300,000 new homes are expected by the end of 2029, with apartments accounting for 80.1% and villas comprising 17.4%. However, villa shortages remain a concern, with only 8,900 villas anticipated by the end of 2024 and another 19,700 by 2025.
The report predicts that Dubai will need 37,600 to 87,700 new homes annually to house its projected population of 5.8 to 8.6 million residents by 2040. With potential delays affecting up to 30% of planned units each year, this translates into a realistic delivery of 35,000 homes per year over the next six years, raising concerns about a long-term housing shortfall.
Key Factors Driving Price Growth
Petri Mannila, Partner and Head of Prime Residential UAE at Knight Frank, emphasized the impact of limited prime locations on price increases, particularly for off-plan properties. Meanwhile, refurbished older homes in the secondary market are also experiencing significant price appreciation.
Macroeconomic Risks to Consider
While Dubai’s property market remains robust, external factors such as global economic uncertainty, oil price volatility, and competition from emerging cities like Riyadh could pose challenges to sustained growth.
A Promising Outlook
Despite potential risks, Dubai’s real estate sector continues to shine as an attractive investment hub, supported by high demand, limited supply, and strong economic fundamentals. With prices expected to climb steadily, the city’s property market remains a lucrative choice for investors and homeowners alike.
