Dubai property sales slump as war pressures prices

Dubai’s residential property market has recorded a sharp decline in transactions as the Middle East war dampens demand, while moderate price corrections have emerged in several segments, S&P Global Ratings said.

The credit ratings agency warned that continuing regional instability, combined with substantial housing deliveries scheduled for 2027 and 2028, could intensify downward pressure on prices, particularly apartments purchased primarily for investment.

S&P Global Ratings credit analyst Sapna Jagtiani said the agency’s baseline forecast assumes disruptions from the conflict will persist into next year, although Dubai’s stronger regulatory environment and changing buyer profile could prevent a more severe downturn.

“Our base case is that the Middle East disruptions will continue into 2027. This, together with new deliveries due in 2027-2028, could accelerate the price correction, particularly in investor-driven apartment segments,” Jagtiani said.

The assessment follows seven months of geopolitical uncertainty that has disrupted purchasing decisions and weakened transaction activity across the emirate’s residential market.

Dubai Land Department figures cited by S&P show monthly property sales transactions averaged 12,644 between March and September, compared with 17,198 during January and February, representing a decline of approximately 26 per cent.

Property prices have fallen between 5 per cent and 15 per cent across different segments since the end of 2025, according to industry estimates examined by the agency. The variations underline the uneven impact of weakening demand across residential categories.

S&P nevertheless expects a gradual adjustment rather than a widespread collapse, citing structural changes that have increased the proportion of long-term residents and owner-occupiers among property purchasers.

Residency reforms, including expanded long-term visa arrangements, have encouraged buyers to acquire homes for occupation rather than exclusively for short-term investment gains. The agency considers this shift an important factor supporting market resilience.

Jagtiani said an improvement in regional security conditions could materially change the outlook.

“However, if geopolitical risk subsides in 2027, Dubai’s supportive fundamentals and regulatory framework mean that we could expect a stabilization of residential real estate prices despite the additional supply,” she said.

The agency estimates Dubai’s residential housing stock could expand by approximately 20 per cent through 2028, assuming scheduled construction projects proceed without significant delays. Apartments are expected to account for a substantial proportion of additional supply.

This concentration creates particular exposure for investor-driven developments, where purchasers may face greater competition from newly completed properties and weaker prospects for capital appreciation.

Independent market figures reinforce evidence of declining activity. Property consultancy Cavendish Maxwell recorded approximately 34,000 residential transactions during the third quarter of 2026, representing a 38 per cent annual decline.

The value of residential sales fell 47 per cent to Dh72.6 billion, equivalent to approximately $19.7 billion, during the three months ending September.

Off-plan properties nevertheless retained a dominant market position, accounting for 72 per cent of transactions and 65 per cent of total residential sales value.

Cavendish Maxwell residential valuation director Ronan Arthur attributed weaker activity partly to purchasers adopting a more cautious approach following the outbreak of hostilities.

Transaction registrations also reflect purchases agreed earlier, meaning quarterly figures incorporate a delay between initial agreements and their formal recording.

S&P’s assessment identifies the financial position of major developers as another stabilising influence. Emaar Properties, Damac, Omniyat and Sobha, the four Dubai developers covered by its ratings, retain substantial contracted revenue backlogs and relatively limited payment delinquencies.

These characteristics provide some protection against falling new sales because developers can continue collecting instalments on properties sold before demand weakened.

Nevertheless, sustained uncertainty could increase payment delays, affect construction schedules and place additional pressure on developers’ liquidity and funding requirements.

The agency is also examining how weaker property valuations might affect banks exposed to residential development and mortgage lending, particularly if the correction becomes more pronounced.

Secondary-market activity could increase as investors seek to dispose of existing holdings, potentially adding competition for developers marketing newly launched apartments.

Luxury and ultra-luxury properties face separate risks because international purchasers may reassess investment commitments amid continuing geopolitical uncertainty.