Dubai’s residential real estate market, heavily reliant on expats and overseas investors, is facing a significant stress test. Can the city’s strong track record cushion the latest downturn as investor confidence wears thin with each passing week?
At a glance
This is the first real-time stress test of Dubai’s post-pandemic property boom — and whether it holds depends less on fundamentals than on how long the conflict lasts. Beyond four weeks, what is currently a pause in activity could turn into a broader repricing cycle.
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- U.S credit rating agency S&P has ruled out a wholesale 2008-style market crash, provided the war does not exceed the four-week threshold, but expects both volumes and residential prices to decline further.
- S&P proposes that the military confrontation will be relatively short-lived, with the most intense period lasting up to four weeks, recognising that broader spillovers and intermittent security incidents could extend beyond this period.
- The UAE real estate market is heavily reliant on expats and overseas demand, with Emiratis comprising only 40% of Dubai buyers.
- The luxury and ultra-luxury segment is likely to see sentiment soften first, says S&P. However, over the longer term, analysts say prices are likely to be more stable than the broader market due to cash-heavy buyers and investors leaning on badge value and historic price resilience.
- Declines in apartment prices will be felt more intensely than villa prices given the strong apartment supply pipeline.
- Transaction volumes in the first half of March were down 31% year-over-year and 51% month-over-month since the start of the conflict.
- The credit rating agency highlighted that the government’s visa reforms have created a degree of stability and stickiness for residents and investors, while a strong protective and crisis management response is mitigating a mass expat exodus from the region.
- This week, and nearly a month into the crisis, luxury UAE developer Ohana Development reported a record-breaking AED 6 bn in sales across its Manchester City Yas Residences – a gated waterfront community located along the Yas Canal in Abu Dhabi and the first Manchester City club-branded residences/
In a new credit rating analysis published this week, U.S credit rating agency S&P has warned that the ongoing regional crisis has introduced a level of caution not seen since the pandemic and 2008 financial crisis.
Dubai’s residential market, which the agency had expected to moderately cool in 2026 after a period of rapid price growth and heavy delivery pipelines outpacing population growth, may see a meaningful correction in prices and volumes if tensions persist beyond four weeks – the fatigue rubicon.
Real estate activity has already dropped by 51% since the conflict began, according to a new report by investment bank Goldman Sachs.
With the conflict acting as a deadweight on buyer confidence, the figure suggests buyers are stepping back entirely — not just negotiating — an early sign of a confidence shock rather than a gradual slowdown.
S&P notes that Dubai’s luxury and ultra-luxury segment is likely to see sentiment weaken first as the ultra-wealthy and high-net-worth individuals who relocated to the UAE for tax or lifestyle reasons reconsider their positions long term.
However, prices at the upper end of the market are likely to remain more stable than the broader market due to cash-heavy buyers and the historic resilience of high-quality global branding.
Certain segments of Dubai’s real estate markets are forecast to be more resilient than others, with S&P expecting declines in apartment prices to be more intense than villa prices given the strong apartment supply pipeline.
Average apartment prices per square foot were down 3% year-over-year and 8% month-over-month for the period from March 1 to March 12.
While a 2008-style crash is ‘not on the cards yet’, credit analysts warn that a high degree of unpredictability around the length and scale of the Middle East war makes it difficult to predict wealth outflow – around 80%-90% of Dubai’s population are expats – and transaction volumes in the longer term as investors/residents are still in the wait-and-see period.
Safe haven resilience - can it last?
Despite ongoing concerns over security, S&P said that Dubai’s optics were strong, with the government’s visa reforms and protective measures creating a degree of stability and stickiness for residents and home/property owners.
These reforms include the Golden Visa programme which grants foreign nationals long-term residency rights -particularly those linked to investments.
So far, the government’s crisis management handbook has included a strong safeguarding response to the strikes, its maintenance of safety for people, food security, and the normality of goods and services, providing confidence to residents.
Dubai developers - war-resilient, but not immune
As demand cools, presales taper and the real estate machine puts on the handbrakes, developers will prioritise cashflow over project expansions, pausing construction and new project planning, according to credit rating agency Fitch Rating.
Building may be delayed further should the Strait of Hormuz remain closed for a prolonged period, with availability of construction material hitting bottlenecks, dampening the construction activity still going ahead or delaying project handovers.
S&P flags that project cancellations are likely, especially for developers that recently launched a development at the start of 2026 or the tail end of 2025, or that did not manage to presell a substantial portion.
The ultra-luxury segment - riding out the storm
However, certain segments of Dubai’s real estate markets are performing better than others, with established developers better placed to absorb short-term volatility than in previous stress cycles through stronger balance sheets and high-liquidity cushions.
The sentiment is more positive in the ultra-prime and prime residential markets, which are likely to remain the most stable during periods of geopolitical tension as high-net-worth buyers with significant cash reserves have lower reliance on mortgage financing.
Branded residences and trophy value developments may continue to attract significant capital, as investors buy into the resilience of globally recognised brands, which have historically commanded a global average premium of 33%, says realtor Savills.
Due for presales or handover in 2026 are a number of high-profile branded residences across the UAE, including Radisson Residences in Abu Dhabi, Park Hyatt Dubai in Dubai Creek, Inaura Downtown, Dubai, Tonino Lamborghini – Marjan Island, Ras Al Khaimah and Karl Lagerfeld Residences – Marjan Island, Ras Al-Khaimah.
In January, luxury automobile brand Mercedes-Benz and developer Binghatti launched the branded ‘city within a city’ Mercedes-Benz Places Binghatti City, with 13,000 apartments across 12 residential skyscrapers.
It is not known whether construction is still going ahead at this stage or the status of the pipeline of branded residences scheduled for project handover in Q1/Q2 2026.
This week, and nearly a month into the crisis, luxury UAE developer Ohana Development reported a record-breaking AED 6 bn in sales across its Manchester City Yas Residences – a gated waterfront community located along the Yas Canal in Abu Dhabi and the first Manchester City club-branded residences.
Setting a new sales record in the emirate’s real estate market, investors reportedly queued at the sales launch, with buyer composition made up of 65% expatriates and international buyers and 35% Emiratis, according to the developer.
With significant transaction volumes achieved despite the current circumstances, developers framed the sales as a sign of continued investor confidence in the UAE.
Mohamed Alabbar, the founder of one of the UAE’s largest developers Emaar Properties, was similarly upbeat in a video commentary released last week.
He highlighted that liquidity in the market remains strong, with “plenty of buyers still seeking attractive prospects”, especially in the high-quality prime, ultra-prime and branded development segment.
He dispelled concerns of an imminent slowdown in the Dubai real estate market, stating that “he didn’t see a cooldown” and that “there were no issues” with “nobody budging on price or offering discounts”, as anecdotal reports circling social media suggested that more predatory investors were scouring property portals for bargain Dubai apartments.
Alabbar also highlighted that the sector has seen annual growth rates of up to 70% and attributed the market’s resilience to restricted bank borrowing and proactive national policies that “would rapidly restore consumer confidence”.
While acknowledging that external factors might cause a temporary loss of confidence, he remained firm that the fundamentals of Dubai’s property market are “stronger than ever”.
Commentary from Dubai real estate brokerage Betterhomes also reflected a more robust stance of recovery, reporting that the Dubai market continued to move despite quieter conditions.
Volumes were at 45% below market average, the broker said, but engagement across its digital platforms has remained broadly consistent with a normal trading environment — suggesting many people are actively following the market.
Investor notes: For now, Dubai’s market remains stable — but its trajectory is unusually dependent on external events, making timing, not fundamentals, the defining risk.
