Targeted policy interventions, such as the rental freeze in Abu Dhabi, are reshaping rental market dynamics and helping cushion affordability pressures and support occupier retention
The UAE’s residential real estate sector is undergoing a recalibration, with both sales prices and rental rates showing simultaneous moderation in the second quarter of 2026 after a period of high growth, according to the latest Living Market Dynamics report from JLL.
The report attributes the softening of both metrics to a combination of cooling demand and increasing supply as the market navigated heightened uncertainty tied to the regional conflict in late February this year.
“The UAE’s residential sector is demonstrating a clear and mature shift, moving from a phase of accelerated growth to a greater focus on stability and long-term value. This evolution aligns with the nation’s broader economic vision and is strongly supported by targeted interventions aimed at enhancing stability and reinforcing confidence amid regional uncertainty,” said Mouhammad Takieddin, JLL’s Regional Head and CEO of Middle East and Africa.
Targeted policy interventions to support long-term market stability
The second quarter marked a pivotal shift in government approach, with targeted policy interventions, such as the rental freeze in Abu Dhabi, reshaping rental market dynamics and helping to cushion affordability pressures and support occupier retention, reflecting a broader long-term commitment to market stability.
A key financial reform also saw several UAE banks begin extending early-stage mortgage financing for off-plan properties prior to handover. While still a limited offering, this initiative could broaden the buyer pool and support the off-plan segment, which continues to dominate UAE’s residential sales transactions.
“For savvy investors and occupiers, this evolving landscape creates distinct opportunities. Combined with the UAE’s strong economic fundamentals, the market remains robust and well-positioned for continued growth,” added Takieddin.
The UAE’s residential real estate sales market presented a divergent picture in Q2. The secondary market in Abu Dhabi experienced declines of approximately 18.1 percent in total transactions. In contrast, total sales transactions saw positive year-on-year growth, driven by robust off-plan market activity.
This resilience was reflected in strong double-digit annual price increases for key segments like apartments and townhouses. On a quarterly basis, townhouses maintained momentum with approximately 6 percent price growth, while prices dropped for both apartments and villas during the same period.
Dubai, which recorded a total sales value of AED87.9 billion, saw transaction volumes decline by 28.6 percent year-over-year, reflecting ongoing market adjustment. The cooling was most pronounced in the secondary market, where transaction volumes fell by approximately 41.8 percent compared to the previous year.
While annual price growth in Dubai remained positive in the 2-6 percent range, led by a strong performance in the villa segment, a quarter-on-quarter analysis confirms a gradual slowdown, with prices declining by 2-3 percent, and apartments recording the highest drops.
UAE rental market remains resilient
The UAE rental market also demonstrated areas of resilience in the second quarter, with new lease registrations in Abu Dhabi showing strong annual growth of 6.5 percent and accelerating by 9.9 percent in the first half comparison.
This momentum was reinforced by average rental rates climbing with growth ranging from 7.6 percent to 26.3 percent annually across all property types, with townhouses leading the increases. That said, this resilience comes amid a broader market softening, as Abu Dhabi’s total registrations declined by 6.1 percent year-over-year due to a drop in total renewals.
In Dubai, while total registrations saw a modest 1.1 percent annual increase, contractions in both new and renewed contracts led to a sharper 8.2 percent quarter-on-quarter decline, signaling weakening momentum. Average rents across the emirate’s various property segments also posted quarterly declines of 4 to 6.5 percent.
Government interventions accelerated in Q2, with Abu Dhabi freezing rental increases in June and Dubai launching its Flexi Rent initiative, allowing tenants to pay in monthly or quarterly installments rather than lump-sum annual cheques with selected developers. These frameworks aim to enhance rental affordability and ease tenant financial burden while improving landlord cash flow predictability.
40,000 units scheduled for completion across Dubai and Abu Dhabi in H2
A significant volume of new UAE residential real estate supply is expected in the second half of 2026, with approximately 40,000 units scheduled for completion across Dubai (28,300) and Abu Dhabi (11,700). In response to this upcoming supply amid a backdrop of cooling demand, developers are exercising greater caution on new project launches, shifting their focus to completing existing projects and maintaining quality.
To capture investor attention in this competitive marketplace, developers are adopting differentiation strategies, forging partnerships with prestigious international brands as a key approach to elevate brand perception and command premium positioning.