Dubai's Real Estate Market Takes a Hit as War Fears Deter Investors

Dubai property sales have collapsed by 44 percent year-on-year since the end of February, according to data from the Dubai Land Department (DLD). This significant decline is evident across the emirate’s home, villa, office, and commercial markets.

On February 28, the United States and Israel launched strikes on Iran, leading to a series of Iranian retaliatory strikes against American assets and allies, which has widened the conflict to West Asia. During the period from February 28 to March 22, the DLD registered 8,059 property sales, a sharp drop that analysts attribute to the war and its spillover effects on investor confidence.

The erratic flight schedules and the closure of some airports have had a substantial impact on the real estate market. 'While it is possible to buy property in Dubai remotely through intermediaries, a significant number of people want to travel to the emirate and have a look and feel of the property before they close the deal,' explained a Mumbai-based property dealer with interests in Dubai.

'That has not been happening since the war broke out, and the on-and-off closure of the Dubai airport, which is a global aviation hub, has also kept potential buyers away from the market,' he added. The conflict has not only affected Dubai but also other cities in the region, including Abu Dhabi, Doha, Kuwait, and parts of Saudi Arabia, which have been hit by Iranian drones and missiles.

Non-resident buyers in Dubai typically purchase property through a notarised power of attorney to DLD-accredited brokers, property consultants, lawyers, or friends and family based in Dubai. However, the frequent cancellations of both scheduled and chartered flights have disrupted these plans, impacting the number of visits that would have resulted in sales.

Despite the significant decline in sales volumes, home prices are down by only 4-5 percent from the year-ago period. The median value of a residential property in Dubai is around $99,250, with the per square foot price averaging around $500. 'This trend shows that the investor class is largely staying away from the market, or at least they have taken a pause given the current circumstances,' noted a Dubai-based real estate consultant, speaking on condition of anonymity.

'In Downtown Dubai, prices continue to be steady, and large deals are being concluded,' the consultant added. According to large brokers, mid-segment residential prices in Downtown Dubai and its surrounding areas remain in the $480-$700 range per square foot, with some luxury and ultra-luxury projects fetching more than $2,000 per square foot.

Wisebiz Realty's Chintan Vasani believes that the current phase of hesitation may be followed by a slow and steady build-up in sales and inquiries, especially if the war or attacks on West Asian countries begin to subside. 'The significant expatriate population, which makes up nearly 90 percent of the real estate market, is largely maintaining residence in Dubai, which is a positive sign,' he said.

Over the past few weeks, some countries have evacuated their citizens, while others have left the UAE for their home countries either due to the conflict or for Eid. However, the resilience of the expatriate community in Dubai suggests that the market could bounce back once the current uncertainties are resolved.