The UAE’s real estate market is heading for a period of slowdown following an impressive five-year growth phase. Analysts from Moody’s have indicated that while the market is expected to cool in the next 12 to 18 months, both developers and banks have the resilience to manage this transition effectively.

The Expected Market Cooling

According to Moody’s analysis, a decrease in property prices and transaction volumes is anticipated. The agency has not detailed the exact extent of this cooling but emphasized that strong market fundamentals, such as ongoing population growth and significant inflows of wealthy individuals, continue to bolster the sector. Lisa Jaeger, a senior analyst at Moody’s, noted that upcoming new supply would contribute to a slight decline in residential prices and developer sales. Despite this, major developers are seen as well-positioned to weather this downturn, given their solid revenue streams and strong cash flow capabilities, enabling them to diversify into new market segments.

Consistent Market Dynamics

The UAE’s property sector has rebounded vigorously since the disruptions caused by the Covid-19 pandemic. Government initiatives, such as the issuance of long-term residency permits and the popularization of the 10-year golden visa program, have historically contributed to this growth. The population surge, combined with an influx of high-net-worth individuals, has significantly fueled price increases and rental demand, particularly in the luxury market. In 2025 alone, nearly 130,000 new investors entered the Dubai real estate space, leading to a notable 20% year-on-year increase in transaction value, amounting to approximately Dh917 billion ($250 billion). Abu Dhabi also witnessed a remarkable spike in property transactions, emphasizing the overall robustness of the market.

Future Deliveries and Market Adjustments

Moody’s highlighted a trend where developers have increasingly opted to sell properties off-plan, banking on the high prices for future gains. This strategy is expected to result in a significant rise in new property completions between 2026 and 2028, especially in Dubai, with forecasts estimating around 180,000 new homes entering the market. This figure is considerably higher than the historical average of 30,000 to 40,000 units annually. Although sustained population growth should help absorb this increased supply, the report anticipates that it may lead to slowed price growth, particularly in affordable apartment segments.

Bank Resilience Amidst Market Fluctuations

Strong regulatory interventions in past real estate cycles have fortified banks against risks associated with construction and property financing. Moody’s analysts believe that current asset quality will remain intact even if there is a downturn in the real estate market. Developers, once heavily reliant on bank loans, have shifted toward alternative funding sources, such as issuing nearly $12 billion in sukuk and bonds since 2023. This financial restructuring, paired with lower interest rates that enhance affordability for potential homeowners, equips banks to better withstand potential challenges in the real estate sector. Adjustments in the market landscape suggest that while profitability might fluctuate, the overall resilience of both developers and banks will play a crucial role in navigating the upcoming market changes.