Insights: How long can the Dubai real estate market hold?
S&P Global Ratings says a 2008-style crash is unlikely, but a meaningful correction is possible if the regional conflict drags on
17 March, 2026
TT
16
Dubai’s residential real estate market is facing a significant stress test, as the ongoing regional crisis introduces a level of caution not seen since the pandemic.
That is the central finding of a new credit analysis published this week by S&P Global Ratings, which stops short of sounding a full alarm but makes clear that the window of resilience is not unlimited.
S&P reports that official sources are recording lower transaction volumes since the conflict began. The ratings agency had already expected a moderation in Dubai’s property market, after years of rapid price appreciation, and some cooling was built into its base case. But the crisis has shifted the outlook. S&P now expects both volumes and residential prices to decline, with the severity of any correction directly tied to how long the situation persists.
The luxury and ultra-luxury segment is likely to see sentiment weaken first. S&P notes that ultra-wealthy and high-net-worth individuals who relocated to the UAE for tax or lifestyle reasons may reconsider their positions.
More broadly, the agency expects apartment prices to decline more than villa prices, citing the substantial supply pipeline already in place for apartments.
S&P also expects a shift in market activity. Presales for new developments are forecast to decline, while secondary-market supply is expected to increase as investors look to offload properties. Foreign investors holding units close to completion are specifically identified as likely sellers, a dynamic that could further suppress market values.
S&P also flags a structural feature of Dubai’s off-plan market that adds complexity. Developers have frequently sold units on aggressive payment plans, collecting about 20–25 per cent in the first year of sale, with up to 70 per cent tied to construction milestones and the remainder at handover.
While this structure allows projects to continue as long as defaults remain contained, it leaves a significant portion of future cash collection exposed to buyer sentiment and financial capacity.
The four-week threshold
S&P emphasises that the timeline that matters most. Its base case assumes the most intense phase of the conflict lasts up to four weeks, and under that scenario, it does not anticipate a collapse comparable to 2008. However, a meaningful correction becomes a realistic possibility if hostilities extend beyond that window.
The agency flags the Strait of Hormuz as a specific risk factor for the construction sector. A prolonged disruption could create bottlenecks in the supply of building materials and push up input costs through rerouting and higher fuel prices. Construction activity is currently continuing normally, S&P notes, pointing to the city’s track record of maintaining project timelines even through Covid-related disruptions.
Developers have buffers, but risks are building
One of the most closely watched questions is whether the conflict triggers outflows of residents or investment capital. S&P’s view is that structural reforms provide a degree of insulation. The Golden Visa programme, which grants foreign nationals long-term residency rights, particularly those linked to property and investment thresholds, creates what the agency describes as meaningful stickiness among residents and property owners.
Beyond the visa framework, S&P points to the government’s crisis management response as a stabilising factor. Measures to maintain safety, food security, and the normal functioning of goods and services have so far supported resident confidence. While sentiment could weaken and some expatriate departures may occur if the situation persists, S&P does not anticipate a sudden mass exodus leading to a market collapse.
S&P also raises a more immediate concern: physical risk to assets. Companies with high-value, prominent assets, including airports, ports, hotels and tourism landmarks, face elevated exposure to potential disruption. At the same time, it has observed minor damage to real estate assets caused by projectiles and debris, though not beyond repair.
For the four Dubai-based developers that S&P rates, Emaar Properties, Damac Real Estate Development, PNC Investments and Omniyat Holdings, existing regulatory frameworks and strong pre-conflict sales backlogs provide near-term protection. Dubai’s escrow regulations require cash collected on off-plan units to be held in protected accounts, with withdrawals permitted only upon verified construction milestones.
This structure, combined with multi-year revenue backlogs, provides a cushion. Emaar’s backlog covers 2.7 years of revenue, Damac’s 5.2 years, PNC’s 2.1 years, and Omniyat’s 4.8 years. Regulations also allow developers to retain up to 40 per cent of a property’s value if construction is on schedule before refunding the remainder and repossessing the unit.
During previous downturns, delinquency rates for top-tier developers ranged between 3 per cent and 10 per cent, though these could be higher for less established players. Developers that entered the current period with higher debt levels may face greater pressure, making financial discipline critical.
Liquidity and investment outlook
All four rated developers entered the current period with meaningful cash positions. As of end-2025, each held escrow balances sufficient to cover construction costs. Emaar held $11.7bn in escrow and $7.5bn in available cash and liquid investments, while Damac held $6bn in escrow and $1.7bn available.
However, S&P distinguishes within the group. PNC and Omniyat have less financial flexibility than their larger peers, with comparatively lower available cash positions and additional funding needs linked to land payments and prior debt-funded acquisitions.
Debt maturities are described as manageable, with no immediate refinancing pressure. Damac and Omniyat issued $600m sukuks in February and March 2026, respectively, while PNC Investments and Omniyat raised $1.25bn and $900m, respectively, in 2025.
S&P highlights that Emaar faces broader pressures than its residential-focused peers, including declining hotel occupancy, reduced footfall in malls and lower revenues from entertainment assets. It also carries the largest planned capital expenditure, estimated at Dhs10–11bn annually in 2026 and 2027, though a portion remains flexible.
Developers are expected to recalibrate investment decisions. Projects nearing completion will likely proceed, while new land acquisitions and discretionary investments may be postponed. For Damac, Omniyat, and PNC, capital expenditure beyond existing commitments is limited.
On dividends, S&P expects Damac to distribute $1.5–1.6bn in 2026, while Omniyat’s dividend outflow is projected at Dhs30–50m. Dividend decisions for Emaar and PNC remain subject to board review but are expected to stay elevated relative to historical levels.
The broader picture
S&P frames its analysis around scenarios rather than certainties, highlighting the unpredictability of the conflict’s duration and impact. Dubai’s property market enters this period in a stronger position than in past cycles, supported by tighter regulation, stronger developer balance sheets and a more stable resident base.
However, the agency’s conclusion is clear: the longer the conflict persists, the more pressure will build on prices, sentiment and liquidity, increasing the likelihood and severity of a market correction.
All data, analysis and projections referenced in this article are sourced from S&P Global Ratings’ credit report published March 16, 2026. This article does not constitute investment advice.
Read: Dubai property activity rebounds while equity sell-off deepens amid regional tension
