According to S&P Global, the country is experiencing a high rate of population growth, which might absorb the new housing units that will be under construction in the UAE in 2026-2027, and this will limit the risk of oversupply.
The rating agency in a research report on the UAE banking sector published earlier this month, noted that real estate prices in the country have been on the rise since 2021 due to the growth of its population, demand, and the ongoing interest of investors in it.
The S&P Global report stated, “Even though the residential real estate market will likely remain buoyant, we expect the increase in demand and prices will moderate over the next 12-24 months.”
Global economic trends sensitive to the UAE through the open economy and the significant share of foreign investment in the residential market are also a major threat to the real estate industry.
The S&P expects that the risk to banks is relatively contained, as most off-plan property transactions are made in cash and about 30-40 percent of secondary sales are funded by mortgages.
Furthermore, the banking sector was less exposed to real estate and construction, with 14 percent of the total lending book as of 30 September 2025, versus 20 percent in 2021.
However, the record revenue backlogs and rapid collection of cash have also been beneficial to developers over the last three years and have enhanced cash flow generation.
The substantial correction of the real estate market and a massive impact on the banking sector seem unlikely. The report indicated that downside risks of the banking sector due to the indirect exposures of the real estate sector via SMEs and personal lending have risen to low levels in the past.
