Will the Dubai real estate market collapse in 2025?

Today I will reveal the burning topic of how things are going in the real estate market in Dubai in 2025. Is it overheated or not overheated? To buy or not to buy? What are the advantages? What are the disadvantages? There is an opinion that the Dubai market is overheated, and prices are about to collapse, and everything is gone. In fact, let’s look at the real numbers and see if that’s the case.

Table of Contents

Dynamics of the Dubai real estate market over the past 15 years

Take a look at this chart. It shows the dynamics of the market over the past 15 years in terms of the number of transactions in all areas of the city. Obviously, the market has grown several times since 2019, and it does not stop growing. Pay attention to the graph that shows the data for 2024. These are not just beautiful numbers — these are real data and statistics on current transactions, which are then used to forecast for the coming year. Accordingly, we see that the growth continues. Now you can see a chart of price changes in terms of transaction volume in monetary terms. It’s all the same.

Now take a look at the chart showing the price per square foot. Based on these data, we can reliably conclude that prices continue to rise, the market is developing, the number of transactions is increasing, and the volume of this market in monetary units is growing.

Return on investment when buying property in Dubai

Despite the fact that prices have increased significantly and the threshold for entering the market has also increased, it is important to pay attention to the fact that the return on investment, that is, your profitability, has not decreased. This is due to the fact that the cost of rent is also increasing.

Therefore, it is important not only to consider how much money you need to invest, but also how much interest you will be able to return within a year. In this regard, it does not matter that the market price has increased. It is still a very profitable investment.

Annual rental payback in Dubai

For example, you can get 7-8% per annum net from a long-term lease. While in Russia and Europe, this figure is only 2-3% per annum. For example, yesterday I passed by a house that I really liked in Moscow, and decided to go to the TSAN website to see how much the apartments cost there. As a result, I found that apartments in this area cost an average of 55 million rubles for a two-bedroom apartment with an area of 60 square meters.

I was wondering how much it would cost to rent such an apartment. I checked the rental price of this apartment on the same TSAN website and realized that it is about 120 thousand rubles per month. A simple calculation makes it clear that the payback period for such an apartment exceeds 40 years. When I evaluate the profitability of properties in Dubai and see that the payback period exceeds 16 years, I understand that this is an abnormal situation, and I will not offer such options to my clients. The payback period should be a maximum of 16 years for a long—term lease, and ideally 12-13 years.

Who is buying a property in Dubai. The most active investors are Indian citizens

In fact, this market has always been incredibly international. For example, in 2020, buyers from Russia ranked sixth in the list of the largest buyers of real estate. In 2022, buyers from Russia moved to positions between the second and third places.

The largest market is the Indo-Pakistani one. Historically, for many years it has been Indian clients who buy the most real estate in this region. In addition, this market is very popular with the British, who occupy the second place among buyers. Dubai also has a large presence of people from China, Canada and various Middle Eastern countries who also purchase real estate.

Therefore, one should not think that the cooling of Russian demand in any way significantly affects this market. If you want to find out which areas are currently profitable for investment, but you only know about an area like Dubai Marina, leave a request. The link to my website is in the description. I’ll give you a consultation and tell you more.

Taxation of individuals in the UAE and Dubai

I would like to remind you once again that Dubai has extremely favorable taxation. Personal income is not taxed. Accordingly, if you have bought an apartment and are renting it out, you will take the entire amount for yourself. If you bought an apartment and resold it for more in six months, then you also take the entire amount for yourself. You have no restrictions; no taxes arise. This has a very positive effect on demand and on how the market is developing.

For Europeans, this factor is usually the key. You know what taxes are in Europe. Therefore, this market is becoming very attractive to Europeans. Their share continues to grow, which also supports demand and prices.

Expats allow the economy to grow

It is extremely important for the authorities of the United Arab Emirates that demand does not cool down. It is expats who allow the economy to grow. The indigenous population of the United Arab Emirates accounts for only 18% of the total population in the country. Therefore, if expats decide to withdraw their money, the economy will come to an end. In this regard, the government is very worried and takes care that the market develops and prices do not fall anywhere. This is necessary in order for investors to continue to be interested in entering this market.

How often can a landlord raise the rent in Dubai?

For example, it was recently allowed to raise rental prices by 20% after the contract was extended for a second year. Accordingly, previously, if you bought an apartment and rented it out, you could raise its price by no more than 10% every year. Now, starting from the third year, you can raise the rent by 20%. This is very good for investors, because rents are growing rapidly. Thus, income and return on investment have increased as leases have become more marketable, even on old contracts.

Disadvantages of the Dubai real estate market

Now let’s move on to the cons. There is extremely high competition in Dubai. If you want to purchase a liquid object, you need to stand in line. You need to participate in lotteries. It is also important to work with a broker so that he can add you to the list and you can book a unit before the official start of sales.

That is, really attractive liquid objects are sold in a matter of hours, even if it is a 60-storey skyscraper. Therefore, it is important to understand that it is not so easy to buy a good object.

The volatility of the real estate market in Dubai

And this is another reason why you need to be very careful about who you work with and choose a broker, taking this nuance into account. Of course, there is market volatility, and growth is followed by a plateau, and there may be some kind of decline. This is absolutely normal. The Dubai market may also experience volatility. There’s nothing unusual about that. And the good thing about real estate is that if there is a downturn in the market, you just don’t need to sell the property at that moment. Just leave it and wait for the market to grow again. But if it suddenly happens that you need to sell the property, well, then you will have to sacrifice your income and sell it, for example, at the price at which you bought it. There’s nothing you can do about it.

The cheapest apartments in Dubai. What do they look like and what is included in the price

Dubai has a fairly high entry threshold. The fact is that economy-class housing is not being built in this city in the usual sense. Even the most budget-friendly option, and I remind you that prices start at $150,000, includes security, a swimming pool, a gym, and beautiful landscaping.

The apartment will be finished, it will already have a kitchen installed, and the price includes a parking space. That is, even the most budget-friendly option in Dubai is a very strong premium class by Russian standards. Therefore, if your budget is less than this amount, you simply won’t find anything suitable in Dubai. Unfortunately, there are no super simple options provided here.

However, there is some good news. All developers offer interest-free installments. Thus, you can enter into a deal with only 30-35 thousand dollars, and then pay in installments during the construction period. In some cases, you will have a couple more years after the house is ready to complete the installment payment.

Dubai Investment property