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Developers face risk of rising construction costs amid large pipeline of pre-sales Property prices in Dubai are expected to stabilise or slightly decline over the next 12 to 18 months, Moody’s Ratings said in a new report. Developers face the risk of rising construction costs and delays as building works are outsourced, the rating agency said, adding there is a particularly large pipeline of pre-sales to complete over the next two to three years. The observations were shared in a rating report for Alpha Star Holding IX Limited, a special purpose vehicle by Damac Real Estate Development, for its proposed sukuk trust certificates. Moody’s assigned a Ba2 backed senior unsecured rating to the certificates. In October 2024, peer rating agency S&P had stated that the expectation of lower prices over 2025-2026 is based on an anticipated increase in residential supply stock, by approximately 182,000 units. as a large number of properties pre-sold during 2022-2023 reach the delivery stage. But significant delays in delivery, often due to construction capacity constraints, could tighten the market and support upward price trends, at least over the short term, the agency said in its report. Earlier this month, Sobha Realty’s CFO Nikunj Patel said during a global investor call that average price realisations had shown a slight reduction in 2024 compared to 2023. He also noted that contracting capacity constraints are limiting project completions and therefore, deliveries. Preliminary estimates released by real estate consultancy ValuStrat in January 2025 indicated that only 58 percent of the projected residential supply in Dubai was delivered in 2024, equating to about 27,000 completed homes, marking the lowest number in six years. |
