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Dubai real estate market forecast to witness 5% to 7% price increase

Dubai real estate market forecast to witness 5% to 7% price increase
22 Mar 2024 09:50

MAYS IBRAHIM (ABU DHABI)

The Dubai real estate market is expected to witness a 5% to 7% increase in prices throughout the year 2024 before plateauing, according to Tatjana Lescova, Associate Director of Corporate Ratings at S&P Global Ratings.


Her remarks were made on Wednesday in a live interactive webinar on the “GCC Corporate Outlook 2024”, during which S&P Global Ratings’ GCC analysts discussed their views on a number of key sectors in the region.


Lescova highlighted the resilience of the real estate sector, acknowledging the varying dynamics across different countries in the region. Despite facing relative volatility in ratings in recent years, she noted a remarkable recovery.


“As of today, the rating levels are back to where they were in pre-COVID era and for some companies, especially Dubai-based developers, … the rating levels are even higher than what they were before COVID,” said Lescova.


She attributed this growth in the real estate sector to strong demand from international buyers and a supportive macroeconomic environment “in the region altogether” including favorable oil prices.
Lescova further credited Dubai’s innovation-friendly policies and government initiatives, such as driving population growth through visa reforms and corporate ownership changes in 2021, for fostering a conducive environment for business, particularly in the tech sector. 


She added that the rebound in tourism, aided by events like the Dubai Expo and the effective management of COVID-19, has supported the hospitality and retail sectors. Moreover, Dubai’s removal from the grey list is expected to boost investor confidence and ignite interest in its real estate market.


Dubai Developers Report ‘Record Pre-sales’


While the real estate market in Dubai experienced a slowdown in project launches in 2020 during the pandemic, the pace of new launches has not slowed down in early 2024. Consequently, a gradual slowdown in price increases is anticipated, followed by a “mild” scenario of price correction, possibly not exceeding five to ten percent, according to Lescova.


However, she pointed out that developers in Dubai have reported “record pre-sales” over the past few years, leading to improved cash flow generation and faster de-risking of construction projects. The accumulation of large cash balances has positioned many developers well for potential cyclical reversals in the future.


Non-oil Economies Positioned for Strong Growth 


Lescova noted that a strong GDP growth of about 2% to 3% is expected on average in the region, with non-oil economies in Saudi Arabia and the UAE forecasted to demonstrate particularly robust growth of close to 5%. 


She said: “Recent numbers on tourism suggest that, at least in Saudi Arabia, the UAE and Qatar, visitors’ numbers have exceeded pre-COVID levels, so that’s driving a lot of positive traction”.
Positive trends in tourism and demographics are anticipated to drive growth across multiple sectors, including hospitality, retail, airlines, education, consumer products, healthcare, telecom, and engineering and construction, added Lescova.


She noted that these sectors will be supported by factors such as population growth, sustained consumer spending, mandatory insurance requirements, and M&A activities.

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