Dubai Property Market Flags “Bubble Risk,” but Experts Point to Strong Fundamentals

UBS index signals elevated risk, yet population growth, diverse demand, and resilient investment could sustain Dubai’s real estate boom

Dubai has recently been flagged as facing “bubble risk” in the UBS Global Real Estate Bubble Index 2025, placing it alongside cities like Los Angeles, Amsterdam, and Geneva. The report highlights that Dubai property prices have climbed sharply in recent years, rising roughly 50% over the past five years and posting double-digit growth since mid-2023. While this has raised concerns internationally, local market experts argue that the emirate’s unique fundamentals may support continued stability.

Population Growth and Sustained Demand

One of Dubai’s strongest buffers against a property downturn is its rapid population growth. The city surpassed 4 million residents in August 2025, a milestone initially projected for 2026, and is expected to grow by another 180,000 people in 2026. Industry analysts estimate that between 45,000 and 96,000 properties will be delivered in the same year.

“Assuming two people per household, demand will keep up with supply quite comfortably,” says Barnaby Crompton, Partner at Eden Realty. Mario Volpi, Senior VP Investment Advisor at Allegiance Real Estate, adds that while some price stabilization may occur in apartments, villas and townhouses are likely to see continued growth.

Factors Driving the Market

UBS notes that Dubai’s market has been fueled by limited supply, strong rental demand, and foreign investment inflows. Rents have surged alongside population growth, often outpacing property prices — though recent trends show prices accelerating faster than rents, which is a classical red flag for overheating.

Affordability has also become a concern, as wages have not kept pace with property inflation and interest rates remain elevated. Nonetheless, Dubai still offers attractive rental yields compared to many global cities, with investors relying on a combination of capital gains expectations and rental returns.

Global Comparisons

While Dubai faces “elevated risk,” it is not in the extreme territory of cities such as Miami, Tokyo, or Zurich, which exhibit higher bubble vulnerabilities. Miami, for example, saw housing prices rise nearly 50% over five years, far outpacing rents and incomes, while Tokyo and Zurich grapple with foreign demand and interest rate dynamics pushing price-to-rent ratios to extreme levels.

Conversely, cities like London, Paris, and Hong Kong are classified as low risk, having seen price corrections or stagnation due to tighter regulation or weaker economic conditions. Dubai’s market, while overheated relative to Singapore or Sydney, retains resilience due to its diverse property types, open regulations, and international demand.

Why Dubai Could Withstand a Cooling Phase

Local experts cite several reasons why Dubai may not experience a repeat of past crashes:

• Open market with light regulation, allowing supply to adjust flexibly.
• Diverse offerings, including luxury branded residences, waterfront projects, and fractionalized investment platforms.
• Prevalence of cash buyers and international investors, providing stickier capital flows.

Paul Jeffreys, founder of PJ Advisory, notes that any market cooling is likely to impact smaller, lower-priced units, while scarcity in luxury properties may protect higher-end segments.

Risks Remain

Despite strong fundamentals, vulnerabilities persist. Income growth lags property inflation, reliance on foreign capital exposes the market to global shocks, and construction activity is rising, with new permits approaching 2017 levels — historically a precursor to oversupply-driven downturns. Sentiment-driven dynamics mean that buyer confidence is crucial; any shift in expectations could amplify volatility.

The Takeaway

While the UBS 2025 index highlights rising risks, Dubai’s property market is underpinned by population growth, robust foreign demand, and diversified offerings that may allow it to weather cooling phases better than other global cities. Experts agree that while caution is warranted, the emirate’s real estate fundamentals remain comparatively strong, and the market may continue to hold steady despite international bubble warnings.