Dubai's property market has plummeted into chaos, with sales falling off a cliff in just two months following the escalation of conflict in the Middle East. The once-thriving city had become a hotspot for luxury real estate investment, but the downturn marks a sharp correction that has left even top analysts stunned.
According to ValuStrat, a Dubai-based consultancy, property sales dropped by 19% in May compared to April, accelerating a trend that saw sales fall by 4% in the previous month. Current transaction levels are now less than half of what they were during the same period last year, a magnitude of annual decline not witnessed since the pandemic.
A separate study by Reidin found that property worth approximately 22.5 billion dirhams (£4.5 billion) was sold in May, representing a 42% reduction from April and roughly half the value recorded in the month preceding the conflict, as reported by Bloomberg.
The market had previously enjoyed a period of intense growth, attracting high-net-worth individuals globally due to Dubai's zero income tax policy. Last year, Dubai surpassed cities like London, New York, and Los Angeles in luxury property transactions, particularly for homes valued between £2 million and £10 million, and even more so for properties exceeding £10 million.
However, the outbreak of war in the Middle East has significantly impacted buyer confidence, with property agents reporting that sellers of luxury villas and apartments have reduced asking prices by tens of millions of pounds. Buying agents specialising in high-value properties note that the few sales occurring are at a 20-25% discount to pre-conflict values.
The uncertainty has led to a noticeable shift in buyer behaviour, particularly among Western European investors. Yasin Valimulla, a Dubai buying agent, highlighted that many super-high-net-worth individuals who purchased properties in the last 18 months have since left the city. He suggested that Western European buyers are now more hesitant, preferring to wait for a year or two for greater geopolitical clarity before committing to purchases.
The slowdown is also expected to impact the local real estate industry. Richard Waind of Cencorp anticipates that many smaller brokerage firms will face closure due to the rapid and profound effect of the conflict on the market, describing it as a "black swan event".