Abu Dhabi housing market cools after record run

Abu Dhabi’s property market lost some steam in 2Q: Capital values rose just 2.1% q-o-q in 2Q 2026 — the slowest quarterly pace in two years — even as annual growth held at a still-robust 17.8%, according to ValuStrat’s latest quarterly report (pdf). Meanwhile, total transaction value cooled 25.1% on a quarterly basis from a record first quarter to AED 46.6 bn, though that still marks an 81.7% y-o-y rise.

Activity softened in May under the weight of regional geopolitical tensions, pressuring off-plan sales and mortgage transactions, EFG Hermes said in a research note seen by EnterpriseAM UAE.

The moderation reflects a market entering a more mature stage rather than one under pressure. “Compared with Dubai, the capital remains at an earlier stage in its property cycle,” with relatively lower prices continuing to support end-user demand, Managing Director and Head of Real Estate Research at ValuStrat Haider Tuaima tells EnterpriseAM.

Affordability constraints are becoming a problem: “The moderation in price growth is likely attributable to emerging affordability constraints, particularly as Abu Dhabi's residential market is driven predominantly by domestic demand from both Emirati and expatriate owner-occupiers and investors,” he says.

Apartments are doing the heavy lifting: ValuStrat's price index for apartments rose 24.1% y-o-y — more than double the 12% gain for villas — on end-user demand for relatively affordable, well-located communities like Al Reem Island, alongside continued strength in luxury enclaves such as Al Saadiyat Island. Abu Dhabi is beginning to mirror Dubai's earlier cycle, where affordability gradually redirected demand from villas toward apartments in established communities, says Tuaima.

The slowdown is concentrated in new launches, not in appetite. EFG attributes a 27% q-o-q drop in primary-market sales to developers launching fewer projects amid renewed regional tensions. Off-plan sales overall still surged 227% y-o-y in value terms to AED 27.1 bn, even as they eased 23% q-o-q. Off-plan continues to dominate the market by volume too: it accounted for 84% of residential transactions in 2Q, per ValuStrat, against a 28.3% y-o-y drop in ready-home transaction volumes, suggesting buyer confidence has so far remained intact. Many off-plan registrations likely relate to purchases agreed to before the conflict escalated, Tuaima notes.

Mortgages are shrinking as a share of the market: Mortgage-backed transactions rose 7% y-o-y but fell 12% q-o-q, and now account for just 16% of total sales value, down from 31% a year ago, EFG said. Land sales, by contrast, grew 1.9x y-o-y, while office transactions barely registered.

In value terms, the commercial sector is outperforming

Office rents in Abu Dhabi's primary districts surged 27.3% y-o-y, with central business district occupancy at 90%, while industrial landlords remain squeezed by a shortage of Grade A logistics space, according to ValuStrat.

IN CONTEXT- Since June, new leases are being struck against a temporary 0% rent-increase cap across residential, commercial, and industrial properties.

“Vacant units are unlikely to provide lessors with an immediate [prospect] to reset rents, as the most recently registered tenancy contract will form the basis of the freeze,” Abu Dhabi Valuation Lead at ValuStrat Sean Swinburne tells EnterpriseAM. The 0% rent cap shields tenants from further rental increases, addressing the affordability challenges, Swinburne says.

Demand in the office market is no longer concentrated in hydrocarbons alone but increasingly spans finance, government entities, AI and tech, professional services, clean energy, education and healthcare, mirroring Abu Dhabi's broader diversification targets, adds Swinburne.

REMEMBER- Abu Dhabi's office leasing market also recorded a y-o-y contraction, with 1H 2026 transactions down 13%, while new contracts fell 15% y-o-y, and renewals dipped 8%.

Looking ahead

Developers are expected to temporarily focus on execution over expansion, says Tuaima, amid rising construction costs, logistics disruptions, and supply-chain challenges. New launches are set to be moderated to allow the existing pipeline to progress — a dynamic that could help preserve pricing by preventing oversupply.

It could be a similar playbook in Dubai, but major developers haven’t really paused — yet. Launches there have collapsed to 5.3k units from 45k the quarter before, but its biggest names have doubled down on scale — Emaar’s AED 200 bn mixed-use project and Majid Al Futtaim's AED 62 bn mega-community among them. Analysts there tie it to well-capitalized developers using phased, master-planned communities to manage pricing and execution risk through the soft patch. Abu Dhabi’s Aldar has also been announcing launches in recent months, seemingly unfazed, from the AED 100 bn Marsa Saadiyat to a AED 6 bn Yas Island expansion.

On delivery: Just 18.8% of Abu Dhabi's expected 2026 residential supply had landed by the end of 1H — 3.4k units against a projected 18.3k for the full year, per ValuStrat, which flags that actual handovers have historically run below projections. Whether the remaining c. 14.9k units due this year slip into 2027 will be the next real test of whether affordable-apartment demand keeps outrunning supply.