By Dubai’s real estate market, fresh off a record-breaking run in 2025, is now facing a critical test as escalating tensions in West Asia rattle investor confidence.
The emirate had seen transactions worth $250 billion alongside a sharp 50–70% price surge over the past few years, fuelling concerns of overheating even before the conflict began.
The latest geopolitical shock has triggered a correction, disrupted key sectors like tourism and aviation, and put a pause on deal activity.
While some investors are stepping back amid rising uncertainty, others are beginning to view the downturn as a potential entry point.
In this exclusive interaction with Invezz, Prashant Thakur, ANAROCK’s Executive Director & Head – Research & Advisory, breaks down the immediate impact, evolving risks, and what lies ahead for one of the world’s most closely watched property markets.
Edited excerpts:
Invezz: How has the ongoing Middle East conflict impacted Dubai’s real estate market, and what could be the long-term implications if tensions escalate further?
“Before we talk about the current situation, let us set the context that right before the war, where Dubai’s real estate stood?”
Thakur pointed out that the market was coming off an exceptionally strong run, with record transaction volumes and sharp price appreciation in recent years.
“I think 2025 was the record year for Dubai. $250 billion of real estate transactions were recorded, which was the highest ever recorded in the history of Dubai.
And in the last four years, the price appreciation was somewhere between 50 to 70%, which was quite steep.”
He noted that concerns around overheating had already begun to surface even before the conflict began.
So, irrespective of the war, people had started to talk about whether the property market in Dubai is heading towards a bubble zone.
“What I wanted to say is that even before this war started, there was chatter in the markets of overheating, everybody was looking for a trigger for some kind of correction.”
Despite that, he emphasised that Dubai’s underlying fundamentals remain strong, supported by a highly diversified global buyer base.
“Having said that, fundamentally, the Dubai market is one of the strongest markets globally because you know, the base, the buyer base is quite diversified. People from 150 countries participate in that market.”
Dubai’s positioning as a safe haven had also played a critical role in attracting capital during earlier geopolitical disruptions.
“And also, Dubai was always seen as a safe haven.”
However, the current conflict has directly impacted that perception, with attacks affecting key sectors.
“Now, after this war broke out, we have seen a good amount of attacks happening in Dubai as well. Yeah, initially it started as a symbolic strike, but now the strikes were quite serious, which kind of disrupted the air travel quite severely.”
“Tourism, which is one of the key sectors contributing to the GDP of Dubai, also took a massive hit.”
In the near term, this has translated into a correction in prices and a slowdown in transactions.
“And the immediate effect was a price correction of 10 to 15%. A few deals that were being negotiated were put on hold.”
“However, there have been reports of some value buying by some big investors who have a high risk appetite.”
Invezz: Which segments are seeing the most pressure in the current environment?
Thakur highlighted that under-construction, or off-plan, properties are bearing the brunt of the slowdown, given their reliance on future price appreciation.
“We have also seen that under construction properties were the first ones to take the hit.”
“Because people, when they buy an under-construction project, they pin their hope on future appreciation.”
He explained that the current uncertainty disrupts this model, while also affecting project execution timelines.
Invezz: How do you see the situation evolving if the conflict continues?
Beyond the immediate impact, Thakur warned of bigger structural risks if the conflict prolongs, drawing parallels with past crises while highlighting key differences.
“If the war escalates, then not only Dubai but the entire Middle East takes a severe beating, we will see a good rerating happening.”
“If you analyse what happened during the Global Financial crisis, the way we saw a steep correction of almost 40 to 50%, and the recovery time was five to six years.”
However, he noted that wars tend to have more complex and prolonged consequences due to physical and economic disruption.
“War is totally different. In war, we see a lot of destruction of physical assets.”
“It’s not that tomorrow if the war ends, the second day everything will be normal. It will take some time to get things back up and running.”
“So in the long term, if the war continues, the impact will be very severe.”
Summing up the outlook, he said the market is already reflecting short-term pressure, with risks skewed further to the downside if tensions escalate.
If the war continues further, then the impact would be felt severely, and the price correction would be in the range of 25 to 30%, and volume, of course, will drop.
Invezz: Are investors pulling back, or are there still pockets of activity?
Thakur said the market is currently split between cautious investors and opportunistic buyers.
“In the current scenario, there are two sets of investors.”
“One who is very risk-averse. They have really kept that buying decision on hold.”
“And then, there is another set of buyers who are risk takers.”
“They are thinking that they might have missed the bus… and in fact this gives them a good entry point.”
“So that’s the reason you’ll see some kind of value buying or distress buying happening.”
Invezz: How is the Dubai government responding to maintain investor confidence?
He noted that authorities have taken several steps aimed at preserving the emirate’s safe-haven image and stabilising sentiment.
“The good part is that the Dubai administration has taken some strong measures to ensure that the image of the safe haven is not broken.”
“They have announced automatic visa renewal for people who are stuck and whose visas have expired.”
“They’ve instructed the hotels not to increase the hotel rates steeply.”
“And they are also announcing some special incentive by giving a rebate on registration and stamp duty.”
Invezz: Do you see investors shifting capital to alternative global markets?
While alternatives exist, Thakur said Dubai’s structural advantages limit the likelihood of immediate capital flight.
“The other comparable market might be Singapore, but it is very costly.”
“Dubai had this unique advantage of a favourable tax environment.”
“I don't think people will immediately pull out their money and put it somewhere else.”
“Because globally, everywhere this uncertainty is there.”
“So people, first of all, will stay invested. Nobody wants to sell at distressed valuations.”
“In fact, they may use this opportunity to buy more.”
Invezz: There are concerns around a large upcoming supply pipeline — is that a risk in this environment?
Thakur acknowledged the risk but said developers are likely to respond by moderating supply.
“It is, it is in this scenario.”
“The first reaction will be that all those new launches will take a pause.”
“Most of these developers are government-backed… they can always time the launches.”
“So the first immediate impact would be you’ll see some kind of slowdown in new launches.”
“And because of this war, the construction activity also gets disrupted.”
“So a lot of developers will try to have a very controlled approach towards new launches.”
Invezz: Indian investors have been a key driver of demand in Dubai, with several high-profile and celebrity-led transactions in recent years. In this backdrop, are you seeing a more sensitive or cautious reaction from this segment now?
He noted that while ultra-luxury activity may continue, overall deal momentum is likely to slow.
“It has not changed.”
“These investments by celebrities were also used as a brand endorsement.”
“They’ll ensure that these ultra luxury deals will happen, but of course at a much more discounted rate.”
“These ultra HNIs are a different set of buyers.”
Having said that, yes… earlier we used to hear of all these big deals every week… that will slow down.
Invezz: Do you expect the market to recover to previous highs anytime soon?
Recovery is likely, but slower than past cycles, particularly compared to the post-pandemic rebound.
“It will, it will, but it will take time.” “This time I think the cycle will be a bit longer.”
“I would say that… the recovery cycle will be somewhere in the range of two to three years.”
“Not before three years.”
Invezz: What should investors keep in mind in this environment?
Thakur emphasised that the current market requires a long-term approach, with short-term speculative strategies unlikely to work.
“First of all, you should be very sure that if you’re investing, you have to invest for the long term.”
“It’s not that you buy today and think of exiting tomorrow and expect a return of 20 to 30%.”
“You need to have a time horizon of at least four to five years.”
“Look for some bargain deals… stay in the market for at least four to five years.”
It's not that the market will not bounce back. The market will bounce back.
“But yes, this time the cycle will be a bit longer.”
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