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GCC real estate faces a more nuanced reality

3 July 2025

 

The GCC real estate market in 2025-26 is characterised by dynamic growth, largely propelled by ambitious government-led diversification strategies and large-scale masterplanned projects. 

Robust sales and significant development pipelines have been interpreted as indomitable market fundamentals across the region, particularly in Saudi Arabia and the UAE. 

This year, a more balanced perspective has emerged that reveals new challenges as markets cope with external threats including a weakening global economy and regional geopolitical tensions, combined with domestic challenges such as oversupply and affordability. 

Concerns about potential oversupply in certain residential and retail segments, especially in Dubai and Riyadh, are notable, with ratings agencies such as Fitch forecasting price corrections. 

With so many real estate projects planned in the GCC region, the construction sector is poised for continued expansion, yet concerns are growing over delivery as capacity is constrained and contractors are becoming increasingly risk averse as their orderbooks fill.   

Balancing population growth with project pipelines and the delivery of national visions will be critical in shaping the market’s performance in the future. 

Investors and developers will need to navigate these complexities if they are to continue enjoying the success they have achieved in the past four years.

Bahrain

Bahrain’s real estate sector performed steadily in 2024, led by the residential market, which benefitted from demographic growth, improved affordability and supportive government initiatives.

Updated immigration policies such as the introduction of a Golden Visa programme have encouraged more expatriates to purchase properties, which has been stimulating demand. 

The price of high-end apartments increased modestly year-on-year, with an increase of 1.4% in 2024, while villa prices remained stable, indicating strengthening demand for premium properties with modern amenities, according to real estate services company Savills. 

There was an even greater increase in rental values, which rose by 23% across Bahrain in 2024, with the Capital Governorate accounting for 48% of rental transactions, Savills says. 

The country’s commercial office market faced challenges in 2024, however, with limited demand and relatively flat rental growth, despite new developments such as SayaCorp Tower entering the market, Savills reports. 

Conversely, Bahrain’s retail sector showed signs of recovery last year, driven by luxury brands opening new stores in Marassi Galleria, increasing foot traffic and demand.

For industrial space, larger warehouses saw a slight increase in rental rates, with a 2.1% year-on-year growth, while rates for smaller units remained stable, Savills says. This sector remains integral to Bahrain’s economic diversification strategy, with further infrastructure investments expected to support demand.

Kuwait 

Kuwait’s residential prices have softened over the past year. Overall residential sales in the first quarter of 2025 declined by 24% quarter-on-quarter, marking the weakest growth since Q2 2024, but only dipped by 2% year-on-year despite an 11.7% rise in transactions, potentially indicating a shift towards smaller or lower-value units in outer areas, according to National Bank of Kuwait (NBK). 

The residential price index remained negative, falling by 1.7% year-on-year in its eighth consecutive quarterly decline, although at a slower pace, suggesting abatement of downward pressure, NBK says.

The slowdown in residential sales in Q1 2025 indicates potential market sensitivity to seasonal factors and a normalisation from strong previous levels. 

The fiscal deficit for 2025 is expected to be -4.2% of GDP, up from -3.1% in 2024 on the back of declining oil revenue due to lower prices. 

Fiscal pressures could impact government spending on projects if oil prices remain low or decline even further.

Oman

Oman’s real estate sector is experiencing steady growth, supported by the country’s broader economic expansion. 

The residential market has registered a 3.6% increase in supply, adding about 38,400 new units in 2024. 

Despite the increase, occupancy rates remained stable at 85.2%, with villas and houses experiencing higher demand. The growth in residential supply is essential to meet the projected housing demand gap by 2035, which underscores the need for proactive planning to avoid potential shortfalls.

Oman’s tourism sector has also contributed positively to the real estate market, with guest arrivals at three- to five-star hotels up 3.6%, leading to a 6.1% rise in revenue. Hotel occupancy rates improved to 53.5%, indicating a gradual recovery in demand.

Looking ahead, Oman’s real estate sector is expected to benefit from government initiatives under Vision 2040, which aims to attract investment and foster economic diversification. Anticipated population and workforce growth will drive demand for housing and commercial properties. 

Challenges such as market dynamics and potential delays in project completions will require careful management. Overall, the outlook for Oman’s real estate sector remains stable, with opportunities for strong growth in both residential and tourism-
related developments.

Qatar

Qatar’s real estate market has continued to adapt to evolving demand patterns and macroeconomic conditions, according to real estate consultancy Knight Frank. While some sectors showed resilience, overall trends point to a period of moderation across the residential, commercial and retail segments.

In the residential sales market, average villa and apartment prices declined by 5% year-on-year. Despite the fall, demand for homes in locations such as Pearl Island and West Bay Lagoon remains stable. Abu Hamour recorded the highest average villa sale price at QR8,587 ($2,359) a square metre (sq m), while the Waterfront led the apartment segment at QR14,300/sq m. 

Mortgage activity rose sharply, with a 168% year-on-year increase in Q4 2024, partly attributed to declining interest rates.

Rental rates in the villa segment dropped by 2.6% in 2024, averaging QR15,875 a month, although premium areas such as West Bay Lagoon continued to command higher rents. The apartment rental market remained relatively stable, with luxury developments such as Pearl Island seeing sustained demand and rents for three-bed properties averaging QR15,721 a month.

In the office market, Grade A rents dipped by 2.3%, settling at QR90/sq m. Prime areas like West Bay and Marina District remain in demand, although vacancy rates in secondary locations are contributing to downward rental pressure.

Retail rents declined by 1.5% amid increasing supply and shifting consumer behaviour. Lifestyle and experiential retail developments outperformed, while secondary malls faced growing competition. 

E-commerce also continued to gain ground, with online sales surging 32% year-on-year in December 2024.

The outlook for Qatar’s real estate market will depend on the pace of economic diversification … and broader regional stability

Qatar’s hospitality sector saw marked improvements, supported by a 25% rise in tourist arrivals in 2024. Key performance indicators, including occupancy rates and revenue per available room, recorded double-digit growth, reflecting the country’s appeal as a leisure and business destination.

The outlook for Qatar’s real estate market will depend on the pace of economic diversification, infrastructure investment and broader regional stability. While high-end residential and hospitality sectors appear well positioned, other segments may find the outlook more challenging.

Saudi Arabia

Saudi Arabia’s real estate market has displayed a mixed performance across all sectors, with momentum in residential and tourism-led hospitality markets counterbalanced by slower activity in the office and retail segments, according to real estate agency CBRE’s latest market review.

In Riyadh, residential sales remained resilient, underpinned by population growth, ongoing reforms and increased demand from Saudi nationals and expatriates. Despite high mortgage rates, key developments such as Diriyah and King Salman Park continue to attract investor attention. 

Demand in Jeddah is more subdued, with price growth stabilising after recent surges. Supply constraints and the government’s focus on increasing home ownership to 70% by 2030 remain influential drivers.

The hospitality sector showed significant growth, particularly in the religious and leisure tourism segments. Strong visitor numbers to Mecca and Madina supported high hotel occupancy rates, while developments in Al-Ula and the Red Sea contributed to the expansion of the kingdom’s tourism offering. 

Saudi Arabia recorded a surge in international tourist arrivals, reflecting its broader push to diversify the economy through the Vision 2030 strategy. Major global hotel brands continued to announce new projects, signalling long-term confidence in the sector’s prospects.

The office market remained relatively stable, although demand patterns are evolving. In Riyadh, Grade A office spaces remained in demand amid limited supply, while older or lower-grade buildings experienced elevated vacancy levels. 

In Jeddah and Dammam, activity was more modest, with tenants preferring flexible leasing arrangements. CBRE notes that public sector activity and government-backed gigaprojects continue to play a significant role in driving office demand.

Retail sector performance varied, with experiential and lifestyle-focused retail formats gaining traction, while traditional malls faced ongoing pressure from e-commerce growth and shifting consumer behaviours. Developments in Riyadh and Jeddah reflect a broader industry shift towards mixed-use destinations with entertainment and leisure at the core.

Looking ahead, Saudi Arabia’s real estate outlook remains cautiously optimistic. Continued progress on gigaprojects such as Neom, Qiddiya and the Red Sea developments are expected to support long-term demand across several asset classes. 

However, affordability challenges, financing constraints and evolving global economic conditions could temper short-term momentum.

 UAE

After four strong years, Dubai’s residential market has shown signs of plateauing in 2025. 

The market recorded more than 42,000 sales transactions in the first quarter of this year, reflecting a 10% quarterly decline due to fewer new project launches and seasonal factors, according to property consultant Cavendish Maxwell. 

At the same time, year-on-year performance remained strong, with transaction volumes rising by 23.1% and total sales value reaching AED114.4bn ($31bn), a 29.6% increase. 

Residential rents increased by 1% quarter-on-quarter and 14.4% year-on-year in Q1 2025, marking the slowest quarterly rise in two years. Gross rental yields averaged 7.3% for apartments and 5% for villas and townhouses in March 2025.

In May, Fitch Ratings forecast a residential price correction in Dubai, starting in H2 2025 into 2026, driven by a record increase in new supply. This is a direct cause-and-effect relationship, where past sales, leading to new projects, are now translating into future supply, which will likely dampen price growth.

Fitch Ratings forecasts a residential price correction in Dubai starting in H2 2025 into 2026, driven by a record increase in new supply

Residential prices surged approximately 60% between 2022 and Q1 2025. Simultaneously, a record number of new property projects were initiated in 2023-24, with a peak delivery of 120,000 units expected
in 2026. 

Fitch says that this average 16% increase in supply in 2025-27 will exceed the forecast population growth of about 5%. This imbalance is the direct cause of the predicted 15% fall in residential property prices.

Rental yields are already showing pressure. While a correction is anticipated, Fitch also notes that UAE banks and developers are well-equipped to handle the downturn due to improved leverage and capital buffers. This suggests that the market is maturing, and stakeholders have learnt from previous cycles, potentially leading to a moderate correction rather than a significant crash.

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Colin Foreman

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