New housing units slated for completion in the UAE in 2026-2027 are expected to be absorbed by the country’s currently strong population growth, limiting the risk of oversupply, according to S&P Global.

Real estate prices in the country have been increasing since 2021, driven by population growth, investor demand and continued interest from foreign buyers, the rating agency said in a research report on the UAE banking sector released earlier this month.

“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,” the S&P Global report said.

The UAE’s sensitivity to global economic trends, driven by its open economy and the high proportion of international investment in the residential market, remains a key risk for the real estate sector. 

However, S&P believes the risk to banks is relatively contained, as most off-plan property transactions are in cash and only about 30-40 percent of secondary sales are funded by mortgages.

In addition, the banking sector’s exposure to real estate and construction fell to 14 percent of the total lending book as of 30 September 2025, from 20 percent in 2021. 

Developers have also benefited from record revenue backlogs and accelerated cash collections over the past three years, which has strengthened cash flow generation.

As a result, a sharp correction in the real estate market and a subsequent significant effect on the banking sector appear unlikely.

However, downside risks from the banking sector’s indirect exposures to the real estate sector through SMEs and personal lending have increased from previously low levels, the report stated.

(Writing by P Deol; Editing by Anoop Menon)

(anop.menon@lseg.com)

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