The UAE’s long-running real estate boom is confronting its first serious challenge after Iranian missile strikes disrupted the Gulf’s image as a safe investment haven. The attacks on airports, ports, and residential areas in Dubai and Abu Dhabi have unsettled investors and highlighted how strongly the region’s property market depends on foreign capital.
For years, developers had been selling off-plan properties—homes purchased before construction is completed—within hours of launch. Now, the demand environment appears to have shifted sharply.
According to Betterhomes, off-plan transactions accounted for 65% of all property deals in Dubai in 2025, meaning most buyers committed to projects that are still under construction. With uncertainty rising, this pipeline could face a far more difficult market ahead, especially as international buyers play a decisive role in demand.
The market reaction was immediate. On Wednesday, shares of major developers dropped, with Aldar Properties, Abu Dhabi’s largest listed developer, and Emaar Properties, known for developing downtown Dubai and the Burj Khalifa, both declining by 5%. Bonds issued by leading developers also fell, and the bond market—an important funding source for the sector—has effectively closed for new issuance as borrowing costs rise.
Some developers attempted to reassure investors.
“In this region we know things start quickly and end quickly and we overcome this because the fundamentals across the GCC (Gulf Cooperation Council) nations are strong,” said Ziad El Chaar, the CEO of Dar Global, the luxury developer behind a string of Trump-branded projects across the Gulf.
“Nothing is on hold … everything is on track,” he said.
Others said the impact was already being felt. A senior real-estate banker told Reuters that his firm had postponed a planned capital raising for a UAE property project this week.
“Investors are not thinking at this stage of investing in the region,” he said, adding that the risk premium for UAE property had become “much higher”. He also noted that international lenders could face pressure to reduce new lending, which might force some developers to sell assets if the conflict continues.
Dubai’s skyline has been dramatically reshaped over the past two decades by ambitious construction projects. The Palm Jumeirah, once a bold land-reclamation experiment, is now a well-established luxury district, while Palm Jebel Ali, a larger palm-shaped development, is currently under construction.
Abu Dhabi has also been steadily transforming its coastline through large-scale development projects.
The property rally accelerated after the COVID-19 pandemic, as the UAE’s tax-free environment, relaxed visa policies, and economic reforms attracted wealthy individuals from around the world. Russians leaving after the Ukraine war, along with billionaires, family offices, and hedge funds, poured money into property, drawn by zero income tax and a business-friendly environment designed to rival global financial centers.
By 2025, the UAE’s population exceeded 11 million, with expatriates making up nearly 90% of residents—one of the highest proportions globally. According to Fitch, Dubai property prices rose 60% between 2022 and the first quarter of 2025.
Growth continued late into last year. Residential prices in Dubai climbed nearly 13% year-on-year in the fourth quarter, according to CBRE, while prices in Abu Dhabi rose almost 32% over the same period.
“The real effect on real estate should be measured on the level of demand once the conflict halts. That is where the true impact will be felt,“ said Mohammed Ali Yasin, the chief executive of Ghaf Benefits, a Lunate company in Abu Dhabi.
He added that the decline in developer shares broadly matched the wider market’s 5% drop on Wednesday.
Even before the recent escalation involving US–Israeli strikes on Iran, analysts had warned that new supply could outpace population growth. JPMorgan recently estimated that Dubai’s demographic expansion may not be enough to absorb the 300,000 to 400,000 new housing units expected by 2028.
“Foreign interest in purchasing property following the conflict will be critical,” economists at Abu Dhabi Commercial Bank said in a note on Wednesday.
They noted that expatriates and overseas buyers remain a key pillar of demand, particularly as a wave of new supply is expected to begin arriving in the second half of this year and continue over the next two years.
The missile strikes have occurred just as that supply surge was starting to build.
“Real estate investment typically relies on stability, visibility and sustained investor confidence, all of which tend to weaken during prolonged geopolitical uncertainty,” said Ryan Lemand, co-founder and CEO of Neovision Wealth Management in Abu Dhabi.
