Dubai Property Market: Navigating the Storm of Supply and Geopolitical Risks

Dubai’s real estate market is facing pressure from two simultaneous shocks. Nearly 385,000 units are currently under construction, with around 80% expected to be delivered between 2026 and 2028. The United States-Iran conflict is quietly dismantling the city’s safe-haven demand story.

Citi Research said the downside risks could be significant under a weaker demand environment. “In our bear case, assuming zero construction delays and a population decline in 2026 followed by a slow recovery, Dubai real estate prices could fall by an average of 7% annually from 2026-28, aggregating to approximately 20% drop by 2028 versus 2025 base prices,” the report said.

The Biggest Supply Wave in Recent Memory is About to Land

Dubai has been under-supplied for most of the last decade. Approximately 385,000 new residential units are currently under construction across the city, with apartments accounting for the vast majority of the supply. Citi Research expects about 80% of the total pipeline to be delivered between 2026 and 2028.

That is an enormous volume arriving in a compressed window. It arrives precisely when demand assumptions are being revised downward. The market’s best hope, counterintuitively, is that developers fall behind schedule. Citi Research’s base case builds in an assumption that roughly 30% of units due each year get pushed into subsequent years due to resource constraints and execution challenges.

“Delivery delays on the aforesaid under-construction units, due to resource constraints or other factors, could turn out to be positive for the sector in the medium-term,” as quoted by Citi.

Dubai’s Safe-Haven Tag is Under Serious Pressure

For years, Dubai attracted residents and capital from across the world on one simple pitch: stability. The United States-Iran conflict has put a question mark over that pitch in a way few events have managed before.

Citi Research’s updated base demand model already reflects the damage. The brokerage now assumes just 1% population growth for Dubai in 2026. Compare that to roughly 4% annual growth the city was posting in recent years.

A modest recovery to 2.0 to 2.5% per year is expected over 2027 to 2031. Even that remains well below the trajectory that was supporting Dubai’s property boom.

Both end-users considering a move to Dubai and international investors who have long treated the city as a capital-preservation destination are now reassessing their positions.

“The ongoing US-Iran conflict introduces considerable risk to Dubai’s future population growth expectations and hence real estate demand, as it potentially questions Dubai’s safe-haven appeal,” the Citi report added.

Even the Base Case Now Calls for Falling Prices Through 2028

Set aside the extreme outcomes. Citi Research’s central scenario is itself a material shift from what the market has grown accustomed to.

Combining the revised population growth assumptions with the incoming supply pipeline, the brokerage’s base case supply-demand model points to annual price declines of 2 to 3% through 2026 to 2028. That aggregates to approximately a 7% cumulative fall in Dubai real estate prices by end-2028. But for a market that has been one of the strongest-performing globally over the last three to four years, it marks a real and meaningful turn in direction, the firm added.

“Overall, our base case S-D model points to 2-3% p.a. decline in pricing over 2026-28, aggregating to c.7% decline in real estate prices by end-2028,” as quoted by Citi.

The Bear Case is a 20% Crash. The Bull Case is Simply Staying Flat

Citi Research’s scenario analysis lays bare just how much uncertainty is sitting inside Dubai’s property market right now.

Even the optimistic outcome is not particularly exciting.

In the bear case, the brokerage assumes zero construction delays and a population decline in 2026 followed by a slow recovery. Under those conditions, prices fall by an average of 7% annually through 2026 to 2028. That produces a cumulative 20% drop against 2025 base prices by 2028.

In the bull case, 50% of the supply pipeline gets delayed and population growth recovers to levels seen in recent history. Average annual prices then remain largely flat over the next three years, the firm added.

Flat prices, that is the best outcome Citi Research is willing to put its name to right now. The distance between a 20% crash and flat prices comes down almost entirely to how deep and lasting the United States-Iran conflict’s impact on Dubai’s demand base turns out to be.

“In our bear case, assuming zero construction delays and a population decline in 2026 followed by a slow recovery, Dubai real estate prices could fall by an average of 7% annually from 2026-28, aggregating to approximately 20% drop by 2028 versus 2025 base prices,” as quoted in the report.

International Buyers are Dubai’s Most Powerful Demand Engine. They are Also the Most Vulnerable

Citi Research points out that this is precisely the buyer segment most exposed to any erosion in Dubai’s safe-haven reputation. If the conflict extends and the city’s image for political neutrality takes a lasting hit, international capital is the first to redirect elsewhere.

Dubai’s price discovery at the top end of the market has historically been driven by this cohort. A sustained pullback in international demand would not just hurt transaction volumes. It would reset price expectations across the board, the firm explained.

“International buyer demand could be disproportionately affected by any perceived decline in Dubai’s safe-haven status, partly also dependent on the length of the current conflict,” as quoted by the firm.

Conclusion

Dubai’s property market is entering a period defined by two forces pulling against each other. A supply pipeline that was always going to test the market. And a geopolitical shock that has arrived precisely when demand needed to hold firm, as per the report.

Citi Research is not calling for a collapse. But it is not calling for a continuation of the boom either. The range of outcomes, from flat prices to a 20% decline, tells you everything about how much genuine uncertainty sits in this market right now. The next two years will be decided not by any developer’s project pipeline or pricing strategy. They will be decided by whether Dubai can preserve the one thing that made it a global real estate destination in the first place. Its reputation as a safe place to be, the firm added.