Dubai Housing Boom Stokes Crash Fears

Dubai’s housing market has been on fire in recent years, but some real estate professionals worry that it could come close to overheating.

A combination of rising home prices and an influx of foreign buyers has made it a great time to be in real estate in the Emirati city, Bloomberg reported. Since the turn of the decade, home prices have risen 70 percent, and last quarter, Dubai saw a record 51,000 home sales, according to Knight Frank. The total value of transactions for the first half of the year reached $73 billion, marking a 41 percent increase from the same period last year.

Because of the United Arab Emirates’ quick reopening to tourists after the pandemic and lax visa policies, Dubai became a magnet for wealthy investors from Russia, crypto millionaires and Indians looking for second homes, according to the report.

Those bullish on Dubai are hopeful that the current boom is different from those that ended in busts in 2008 and 2014. Today, developers must pay for land upfront, mortgages usually cover only 80 percent of property value and speculation has cooled significantly, as less than 5 percent of buyers resell within a year, compared to 25 percent before the last crash.

“Almost every week, we meet three new developers that we’ve never heard of before,” said Sean McCauley, CEO of Devmark, a consultant for developers in Dubai.

But soaring land prices are leading some interested developers to feel the heat. “Increasingly, it’ll be hard to make the math work,” he said.

The ongoing drama around President Trump’s tariffs has made it easier for some non-Emirati buyers to plant a flag in the city. The U.S. dollar is at its weakest point in more than half a century. Because the dirham is tied to the dollar, foreign buyers, including those from European countries, have much more buying power in the emirate.

“This is the biggest market driver,” Taimur Khan, head of research for the Middle East and Africa at JLL, told Bloomberg. “You get a massive discount. And if the dollar recovers, you get another bump up on any exit returns you might have.”

Whether or not this cycle ends in another bust remains to be seen as ambitious high-rise projects continue to crop up across the country. For now, wealthy Europeans and other foreign investors could keep on fueling the market’s growth to unforeseen levels.

“There’s good hospitals, good schools and good infrastructure,” Michael Belton, CEO of property firm Mered, said. “Dubai ticks all those boxes in spades.”

— Chris Malone Méndez