Dubai has solidified its reputation as a global hub for wealthy expatriates, drawn by its business opportunities, tax-free environment, and vibrant economy. However, its booming real estate market faces a growing challenge: the supply of luxury housing is struggling to keep up with surging demand.

The emirate, which attracts ultra-high-net-worth individuals from around the globe, has seen its appeal further enhanced by geopolitical instability and tax policy changes in competing regions. Yet, the influx of affluent buyers has created a severe housing shortage.

Knight Frank's recent Dubai Market Review revealed that listings for luxury properties priced above $10 million have plummeted by two-thirds this year, leaving only 460 available. To address this, Dubai plans to complete nearly 9,000 villas by the end of 2024 and an additional 19,700 by 2025.

Experts predict this may not be enough. Dubai will need between 37,600 and 87,700 homes by 2040 to accommodate a population projected to reach 5.8 million. Meanwhile, prices in prime neighborhoods like Palm Jumeirah and Emirates Hills have skyrocketed, rising 20% year-over-year in the latest quarter.

High-end inventory is dwindling. In 2023, just nine properties priced above $50 million were available, compared to 37 last year. "It paints a clear picture of the shortage of ultra-luxury homes," said Faisal Durrani, Knight Frank's head of research for the Middle East and North Africa.

While Dubai’s real estate market remains buoyant, Durrani cautions against overreliance on its current growth trajectory. A global economic slowdown or declining oil prices could lead to reduced demand, population shrinkage, and potential job losses.

Despite these risks, Dubai remains a relative bargain in the luxury market. For $1 million, buyers can secure 91 square meters of prime property—significantly more than 33 square meters in London or 34 in New York.

"Dubai still offers affordable luxury compared to other global cities," Durrani emphasized, solidifying its position as a premier destination for luxury investment.