Inside Dubai’s $2.6B Luxury Boom: What’s Next for the 2026 Property Cycle

As Dubai enters the 2025/2026 business season, the city’s real estate sector continues to demonstrate remarkable resilience-driven by record tourism inflows, strong off-plan sales, and an expanded supply pipeline. While these forces sustain growth, the volume of upcoming deliveries is set to reshape market dynamics, placing increased importance on asset quality, location, and sustainability.

Market Performance and Trends

Dubai’s property market remains robust in 2025, supported by both tourism and investor appetite. In the first half of the year, the city welcomed 9.88 million visitors - a 6% year-on-year increase-with hotels achieving an impressive 80.6% average occupancy rate. This ongoing tourism boom continues to bolster demand for rentals and short-term accommodation.

Sales activity also remains strong, particularly in the off-plan segment, which accounted for 69% of transactions in Q1 2025. Average prices across the city rose 3.7% quarter-on-quarter, reaching AED 1,749 per square foot. Meanwhile, Dubai’s luxury property segment reached new heights, with transactions for homes priced above US$10 million totaling US$2.6 billion in Q2 2025, marking an all-time high for the super-prime market.

Supply Surge and Market Adjustment

An estimated 70,452 units are scheduled for handover in 2025, followed by another 133,041 units in 2026-well above historical averages. This surge creates opportunities for buyers but also raises the risk of a 10–15% price correction, particularly within the mid-market segment, where most of the new supply is concentrated.

In contrast, premium and ultra-luxury properties are expected to hold their value thanks to limited availability and continued international demand. Developers adopting phased handovers, strong financial discipline, and transparent escrow practices are better positioned to maintain stability. The next market cycle is expected to accelerate the “flight-to-quality” trend, with location, brand reputation, and ESG credentials becoming key differentiators for property valuation.

Investment Opportunities

International investors are showing increasing interest in branded residences, a segment that now comprises nearly 140 projects across Dubai. These properties consistently outperform the wider market in terms of value appreciation.

For income-focused investors, mid-market communities continue to deliver competitive rental yields, while short-term rentals benefit from a clearer Dubai DET framework - set at AED 300 per bedroom annually-which enhances both compliance and income security.

Additionally, mixed-use developments are becoming more attractive. With office vacancy rates at just 7.7% and rental prices still rising, projects combining residential, retail, and office components are proving particularly resilient, offering investors stable cash flows and long-term tenants.

Looking Ahead to 2026

Several major developments are set to redefine Dubai’s property landscape. Expo Valley, featuring 532 units in its first phase, will begin handovers in early 2026, while the relaunch of Palm Jebel Ali, adding 13.4 kilometers of new shoreline, is expected to expand the city’s prime property offerings. Meanwhile, Expo City is gaining traction among European high-net-worth investors, reinforcing Dubai’s reputation as a global investment destination.

Collectively, these initiatives indicate a broader distribution of demand and a more diverse investment landscape heading into 2026. However, the rapid increase in supply remains the main short-term challenge and may exert pressure on mid-market growth. Rising borrowing costs and service charges are also impacting overall affordability.

Despite these challenges, the prime and super-prime segments remain well-positioned for continued success. The scarcity of land, Golden Visa incentives, and growing international investor interest are expected to sustain record-level activity. Looking forward, branded, sustainable, and strategically located developments are anticipated to be the most resilient performers in Dubai’s next property cycle.