Dubai property sales slump as war pressures prices

Dubai's residential real estate market has experienced a significant downturn in property sales, attributed to the ongoing conflict in the Middle East, according to S&P Global Ratings. The agency's analysts project that regional instability, coupled with a surge in housing deliveries slated for 2027 and 2028, may further exacerbate downward pressure on prices, particularly for investment-focused apartments.

S&P Global Ratings' credit analyst Sapna Jagtiani highlighted that the agency's current forecast anticipates the conflict to persist into the new year, but Dubai's robust regulatory framework and evolving buyer demographics could curb the severity of a downturn. The assessment follows a period of geopolitical uncertainty that has deterred purchasing decisions and reduced transaction activity in Dubai's residential market.

Monthly property sales transactions averaged 12,644 between March and September, a decline of approximately 26% compared to 17,198 transactions during January and February. Property prices have dropped between 5% and 15% in various segments since the close of 2025, indicating a varied impact on different residential categories. S&P Global Ratings expects a gradual adjustment in the market rather than a complete collapse, attributing this to structural shifts that have increased the share of long-term residents and owner-occupiers among buyers.

Residency reforms, including expanded long-term visa options, have incentivized buyers to purchase homes for personal use rather than solely for short-term investment purposes. Should regional security conditions improve by 2027, S&P Global Ratings suggests that Dubai's market fundamentals and regulatory environment could facilitate a stabilization of residential real estate prices despite increased supply.

The agency forecasts Dubai's residential housing stock to grow by around 20% through 2028, assuming construction projects remain on schedule. Apartments are anticipated to constitute a significant portion of this additional supply, presenting a heightened risk for investment-driven developments where buyers might encounter heightened competition and reduced potential for capital gains.

Independent market data corroborate the declining activity in the market, with Cavendish Maxwell reporting a 38% year-over-year decline in residential transactions during the third quarter of 2026. Sales values fell by 47% to Dh72.6 billion ($19.7 billion) during the three months ending September, with off-plan properties accounting for 72% of transactions and 65% of residential sales value.

However, luxury and ultra-luxury properties face distinct challenges, as international buyers may reevaluate their investment commitments in light of ongoing geopolitical tensions.