Tensions between the United States and Iran, which have for the first time moved closer to the Persian Gulf region itself, immediately attracted enormous media attention. Public debate quickly filled with commentary, predictions and strong opinions — often from people without direct information or personal experience from Dubai.
In recent days we have observed two clear extremes. On one side, there has been an effort to downplay the situation. On the other, a tendency to ignore possible impacts altogether. As is often the case, the reality lies somewhere in between.
From our day-to-day work in Dubai we can see that the first reaction of the market came relatively quickly. During the first week of tensions, transaction volumes were roughly half compared to the previous week. However, this did not represent a market collapse, but rather a natural slowdown in activity during a period of increased uncertainty.
We continue to monitor the situation closely and remain in contact with our clients, who are naturally asking about the current development and possible scenarios for the coming months.
Financial markets reacted quite sharply. The index of Dubai-listed developers fell by roughly one fifth within a few days, erasing the gains recorded earlier this year.
Such reactions are typical for financial markets. They tend to respond to geopolitical uncertainty very quickly and often more strongly than the actual economic impact would suggest.
The physical real estate market works differently. It is slower and more stable. In Dubai we are not currently seeing significant price declines, but rather a slowdown in activity. Developers are holding their price lists and sellers are not rushing to offer discounts.
Buyers are more cautious, analysing the situation more carefully and postponing some decisions by several weeks. Demand is lower than before the escalation in the region, but it remains solid.
From our experience, it is also important to remember that Dubai’s real estate market functions differently today than it did ten or fifteen years ago. Investors now come from all over the world, and most of them invest with a long-term horizon.
This is a fundamental difference compared to situations such as the 2008 financial crisis or the COVID-19 pandemic, when the very foundations of the global economy were shaken.
The current development is different. What we are seeing in financial markets is primarily a short-term reaction to geopolitical uncertainty, not a change in the long-term fundamentals of Dubai’s real estate market.
For years, Dubai has built its reputation as an oasis of stability in a region that is often perceived as geopolitically volatile. The current tensions have affected this image in the media and raised questions among some investors about the risk of the wider region.
Investors who are less familiar with Dubai naturally consider the broader geopolitical context. Those with personal experience of the market often see the situation differently.
The United Arab Emirates has long invested in security infrastructure, strategic reserves and crisis management systems. The ability to build and maintain such systems in a challenging regional environment is one of the reasons why Dubai continues to retain the trust of global investors.
Once the situation in the region stabilises, it is likely that Dubai will not only restore its position as a safe haven but may even strengthen it in the eyes of some investors.
A large part of Dubai’s real estate market is based on so-called off-plan projects — the purchase of properties before construction is completed.
In times of uncertainty, this model has two sides. On the protective side, there is the strictly regulated escrow system. Investors’ funds are not paid directly to the developer but are held in a separate account and released gradually according to construction progress. As a result, the risk of losing the entire investment is significantly lower than in many other countries.
At the same time, the psychological factor should not be underestimated. During uncertain periods, some investors may find it more difficult to commit to a property that does not yet physically exist. Some may question whether a project will be completed on time.
Developers with a strong track record of completed projects tend to ease these concerns much more effectively than others. Periods like this highlight the importance of choosing developers with a long and reliable history.
From our experience working with investors from Central Europe, sensitivity to geopolitical risk depends less on nationality and more on the individual investor’s profile.
More cautious reactions typically come from first-time investors, those with shorter investment horizons, or those who entered the market relatively recently.
Investors who have already experienced previous cycles of decline and growth tend to react much more calmly. They understand that such situations have their own development and their own end.
Portfolio structure also plays an important role. If the investment represents only a part of a broader portfolio, reactions tend to be more rational. The greatest nervousness often appears among investors for whom the investment represents a significant portion of their savings.
Dubai has already experienced several crisis periods that paradoxically led to further market growth.
After the 2008 financial crisis and after the pandemic in 2020, the market initially cooled down. However, both periods were followed by one of the strongest growth phases in the history of Dubai real estate.
A similar effect was also visible after 2022, when the war in Ukraine brought capital to Dubai from regions seeking a stable, tax-efficient and well-connected jurisdiction.
Whether a similar scenario will unfold again now is still too early to determine. We continue to monitor and analyse the situation closely.
The future development of Dubai’s real estate market will depend mainly on the duration and intensity of tensions in the region.
The optimistic scenario assumes that the situation stabilises within a few weeks and diplomatic agreements calm the region. In such a case, the market could relatively quickly return to normal activity and prices could remain stable or continue to grow slightly.
A more realistic scenario assumes a longer period of uncertainty. Tensions could last several months, and transaction volumes could remain below normal levels for roughly six to eight months. In some segments, a mild price correction may occur and developers may offer more flexible payment plans.
A stress scenario would arise if the situation escalated significantly or if maritime transport in the Strait of Hormuz were disrupted for a longer period. Such a development would have serious economic consequences for the entire region and the real estate market would likely experience a stronger correction.
At this moment, however, there are no indications that the United Arab Emirates intends to become a direct participant in military escalation.
Periods of uncertainty always bring new questions, but often also new opportunities. If you would like to understand how Dubai’s real estate market currently works, we will be happy to share our latest insights.
