Dubai’s real estate market saw the highest risk increase globally since mid-2023, while still remaining in the moderate risk territory, according to UBS’ latest Global Real Estate Bubble Index (pdf). The emirate’s risk score climbed to 0.64 in 2024, up from 0.14 last year, pushing its ranking to 14th from 23rd — the largest risk score increase among all analyzed cities. Dubai also topped the index for price increases.

What exactly is a real estate bubble? A real estate bubble refers to a situation where property values in a specific area are excessively inflated compared to their actual worth, often due to speculation and other external influences. This can lead to abrupt downturns, where prices drop sharply as the market seeks to correct itself — often through overcorrection.

Home price surge: Home prices in Dubai have surged 17% over the past year and are now 40% higher than in 2020, driven by a wave of demand fueled by rapid population growth and an influx of international investors from regions with shaky economic climates. Even with these price hikes, rental yields remain solid at 6-7%, thanks to a 60% increase in real rents.

But with growth comes risk: Speculative buying and off-plan sales have driven much of the price surge, especially in the luxury sector, which UBS sees being potentially overvalued, and expects to see some volatility.

Still, strong demand fundamentals buoy the sector, with rising household incomes, high cash transaction levels, and a thriving local economy expected to keep it in check.

Looking ahead, the market faces a few hurdles: Economic slowdowns and oil price drops pose potential risks, and with Dubai’s housing stock expected to grow by a third by 2029, long-term price growth may be harder to sustain, the report says.

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