Dubai’s residential property market absorbed a sharp shock in the first half of 2026 but is showing early signs of recovery, according to ValuStrat’s Q2 market report.
The ValuStrat Price Index for freehold residential property fell 4 per cent over the quarter to 220 points, roughly where it stood a year earlier at 219.8 points.
Since the onset of regional conflict in March, values have declined 10 per cent. But the pace of decline has eased considerably: after a 6 per cent monthly drop in March, the index fell 2 per cent in April, then 1 per cent in both May and June.
Villa values averaged AED 13 million in Q2, up 2 per cent annually. Apartment values averaged AED 1.79 million, down 3 per cent from a year earlier. Palm Jumeirah saw villa values fall as much as 11 per cent over the quarter. Some apartment communities bucked the trend, with International City up 2.4 per cent and Dubai Sports City up 1.4 per cent.
The prime residential segment held up slightly better on an annual basis but continued to slide quarterly. The prime VPI reached 234 points, up 1.1% year-on-year but down 4.5 per cent over the quarter. Premium apartments were weaker, falling 4.9 per cent annually and 6.4 per cent quarterly.
Rental values were broadly flat. The residential rental VPI rose 1.7 per cent year-on-year to 205.8 points. Average villa asking rents came in at AED 441,000 per year, up 2.2 per cent annually. Average apartment asking rents reached AED 98,000 per year, up 1.3 per cent. Studio apartments averaged AED 62,000 annually; three-bedroom apartments AED 184,000.
Transaction volumes fell sharply. Off-plan Oqood registrations dropped 24.1 per cent year-on-year and 16.1 per cent quarter-on-quarter to 27,113, the third consecutive quarterly decline. Ready-home transactions totalled 8,011 in Q2, down 41.5 per cent annually and 29.7 per cent over the quarter.
ValuStrat noted that officially recorded transactions likely reflect deals agreed from March onwards, meaning the data captures the full weight of conflict-driven disruption. June’s ready-home sales posted the strongest month-on-month increase in three years, a sign that lower price points are beginning to draw buyers back.
The office market proved more resilient. Capital values rose 3.7 per cent over the quarter and 13.9 per cent year-on-year, with the office VPI reaching a record 299.5 points. Average office values have nearly tripled over five years to AED 24,596 per sq m.
Downtown Dubai commanded the highest values at AED 53,012 per sq m, followed by DIFC at AED 45,208 per sq m. Transaction volumes fell sharply in Q2, with the report attributing much of the decline to deals agreed in the conflict period.
Industrial property continued to outperform. The industrial VPI rose to 186.4 points, with logistics warehouse values up 17.7 per cent annually. Al Quoz led annual price growth at 30.4 per cent. Asking rents ranged from AED 270 to AED 1,025 per sq m, rising an average of 11.9 per cent over the quarter.
Hospitality was the hardest hit sector. Hotel occupancy fell to 33 per cent in March 2026, down 54.4 per cent year-on-year, with some Palm Jumeirah luxury hotels reportedly reaching occupancy in the low single digits.
Several landmark properties, including Armani Hotel Dubai and Burj Al Arab, temporarily closed for refurbishment. Forward bookings have since improved, with some five-star resorts on the Palm approaching 60 per cent occupancy heading into Q4.
Dubai approved a second AED 1.5 billion economic incentive package in Q2, bringing total support measures since March to AED 2.5 billion. The package covers 33 initiatives spanning government fees, tourism, trade, real estate and construction, including deferred payments and extended building permit validity.
The UAE Central Bank expects economic growth to moderate to 1.7 per cent in 2026 before rebounding to 9.8 per cent in 2027, with the slowdown attributed to regional disruptions across trade, shipping and tourism.
Moody’s affirmed the UAE’s Aa2 sovereign rating with a stable outlook, citing strong fiscal buffers and economic diversification despite near-term pressure.
On the supply side, around 20,000 homes were completed in the first half of 2026, representing 15 per cent of the full-year delivery estimate of 129,066 units. A total of roughly 324,000 apartments and 66,000 villas are currently under construction across Dubai, with handovers scheduled through 2030.
