Growth gap between luxury and mainstream markets widens in record year for Dubai residential sales

• Number of residential sales up 18% year-on-year
• Annual value of transactions increases by 25% to AED 544.2bn
• Prime values have accelerated sharply, surpassing AED 4,300 psf

Dubai | 2 February 2026: Dubai’s residential market enjoyed another record-breaking year in 2025, recording substantial growth in both the number of sales and the total value of transactions, according to the Dubai Residential Market Review Q4 2025 from global property consultancy Knight Frank.

Transaction volumes reached an all-time high of 205,400 deals in 2025 – an 18% uplift compared to 2024. The increase in total sales value was even more pronounced, rising by 25% year-on-year to AED 544.2bn in 2025, as the prime and ultra-prime sectors continued to drive market performance.

Knight Frank’s analysis shows the ultra-luxury segment remains particularly robust. Sales of US$ 10 million+ homes are at historically high levels, with 143 deals recorded in Q4 2025 and 500 deals completed in 2025. This segment continues to show resilience, cementing Dubai’s status as a top-tier global destination for ultra-high-net-worth individuals.

Faisal Durrani, Partner – Head of Research, MENA, said: “The fact that value growth is outpacing volume growth indicates a market driven by capital appreciation and a shift toward higher-value assets rather than turnover alone, as demonstrated by the record 500 transactions over US$ 10 million in 2025. The prime residential sector continues to outpace the wider market. While mainstream prices demonstrate steady, gradual growth, prime values have accelerated sharply surpassing AED 4,300 psf.”

Shehzad Jamal, Partner – Real Estate Consultancy, MENA, added: “The upward trend in Dubai’s housing market has now spanned five full years, and while we anticipate continued growth, there are clear signs that the market is maturing. Growth has been underpinned by the rising popularity of smaller, high-amenity units among both investors and owner-occupiers, and the combination of affordability, strong rental yields and sustained population inflows has kept absorption high despite rising prices. Our analysis suggests that we may now be seeing a two-speed market emerging, where prime locations outperform even as price growth normalises in the mid-market.”

Rental market

Knight Frank’s analysis of the rental market found Downtown Dubai commands the highest annual rents, with one-bedroom apartments averaging AED 127,000, followed by Dubai Marina at AED 102,000. Among the top 10 communities by rental value, Jumeirah Village Circle recorded the highest annual increase in average rental rates, jumping by 13% to AED 72,500, while rents in Business Bay rose by 10% to AED 99,000.

In contrast to the apartment market, where all of the top 10 most active locations saw rental rates increase during 2025, the villa rental market is showing signs of fragmentation. While premier communities such as Tilal Al Ghaf outperformed with a 13% increase, secondary locations such as Al Furjan saw values dip by 2%, indicating that price sensitivity may be impacting on non-prime villa locations.

Surge in supply

The registered projects pipeline, as tracked by Knight Frank suggests an influx of inventory in 2026. Indeed, over 160,000 units could enter the market this year.

Jamal said: “When it comes to new housing supply, the reality is that the completion rate is likely to be far lower than what the data suggests. Developers have been unable to meet completion obligations throughout this property cycle, with the total proportion of homes completed on time last year improved to 64% in 2025 of 39,700 units, which is just-above the long-term delivery rate of 36,000 homes per year over the last 20 years. This follows a 50% completion rate in 2024 of just 30,500 units,”.

Dubai’s residential market continues to be dominated by vertical living, with apartments accounting for 85% of the forecast supply pipeline, compared to just 14% for villas and 1% for branded apartments, according to Knight Frank’s analysis.

Durrani concluded: “We expect to see an overall moderation in the pace of house price growth as supply increases and the natural progression of the property cycle plays out. However, the structural drivers of demand in Dubai – population expansion, wealth migration and economic diversification – remain firmly intact. While the rate of house price growth may be demonstrating signs of slowing, crucially it remains positive, underpinned by robust international HNWI demand for premium homes, continued inflows of global wealth and a deepening pool of resident investors.

“Overall, our expectation for 2026 is for price rises of around 3% in the prime segment, while the growth in the mainstream market is likely to average around 1% by the time we get to the end of December 2026.”