Dubai Real Estate Reaches Fork In Road Over Cost Of Land, Off Plan Prices

(MENAFN- Khaleej Times) Dubai real estate is entering a decisive phase as the market's ability to sell homes reaches its natural limits, revealing a clear fork in the road between the cost of land and off-plan pricing.

With developer economics becoming increasingly challenging, we can expect fewer launches in 2026, and this will be the year when land prices adjust downward to restore project viability, or off-plan prices rise.

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Overall, the market remains strong. Dubai currently has close to one million freehold ready homes, most of which are occupied and changing hands in a stable market.

If there were a structural problem in the ready-home segment, it would already be visible through high vacancy rates or widespread forced selling. That is not happening.

Approximately 500,000 units are under construction, the largest pipeline the Dubai has ever managed at one time. But much of this stock is already sold, so the real question is when and how investors sell and move their money out.

Homes under construction already affect today's market. Many can be resold before completion, and many buyers are still partially through their payment plans. These units will ultimately compete with ready resale homes for buyers.

Pressure on sellers builds well before homes are completed. Off-plan demand in Dubai is largely international, driven by overseas investors, entrepreneurs, and foreign capital. By contrast, resale demand is more local, led by residents, end-users, and domestic investors.

As a result, the number of potential buyers shrinks once homes move into resale. Demand does not disappear, but homes take longer to sell, which is normal in mature property markets.

Historically, Dubai absorbs around 35,000 ready homes annually in balanced conditions. In 2026, handovers could rise to 40,000–50,000 units as existing projects reach completion.

Staggered handovers help spread supply over time, but they do not remove pressure on liquidity. Competition builds earlier through resale listings, pricing behaviour, and tougher negotiations.

The typical market response is slower transaction volumes, prices levelling off rather than continuing to rise, and smaller gaps between asking and achieved prices. Markets do not need falling prices to correct imbalances. Often, prices simply stop rising and pressure moves back through the system.

An often-missed dynamic is how this pressure moves through the market. Resale prices tighten first, off-plan resale margins adjust next, and pricing power for new launches weakens last.

This follows a familiar pattern. Developers feel it before buyers do, through longer sales cycles and higher incentive costs.

This is why 2026 matters for developers in Dubai. Land prices are at historic highs, and profitability depends more on how quickly units sell than on headline profits.

Escrow accounts protect buyers, but they do not protect developer returns. When sales slow, cash flow tightens, returns get squeezed, and developers become more selective about launching new projects.

Under these conditions, a clear reduction in new project launches in 2026 compared to 2025 is likely. This is not because demand disappears, but because launching projects becomes harder to justify financially. To date, launches are 47% down on the same period last year. While it's too soon to calculate the longer-term effect this year, an annual drop in unveilings looks inevitable, resulting in less supply, while demand remains healthy.

Higher land costs, more cautious buyers, and slower sales naturally reduce speculative development. Supply does not disappear, but it becomes more selective.

This leads to the central question for the market: will land prices adjust to make projects workable at current off-plan prices, or will off-plan prices need to rise to justify today's land values?

There are two sustainable outcomes. If land prices adjust, projects become easier to manage financially, prices stabilise, and transaction volumes recover gradually. If land prices stay high, off-plan prices must rise, product quality becomes critical, and only the strongest locations and developers succeed.

What is unlikely is a long period where land prices remain elevated, sale prices stay flat, and volumes remain high. Markets do not sustain that imbalance.

Dubai continues to attract international capital because it offers political and regulatory stability, personal safety, tax efficiency, capital mobility, strong infrastructure, and a lifestyle comparable to leading global cities. As long as these fundamentals hold, off-plan demand will continue, particularly for well-located and well-designed projects.

As Dubai real estate enters a new phase, risks are limited to certain parts of the market rather than the system as a whole. In 2026, those who understand absorption limits, timing of liquidity, and the economics of launching will navigate this phase effectively. Those relying on past momentum are likely to struggle.

The writer is CEO, fäm Properties.

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