The attacks on airports, ports and residential areas in both cities have punctured the ‌region’s reputation for stability at a moment when concerns about overheating were already surfacing.

Developers that had been selling out off-plan launches within hours now confront a sharply changed demand backdrop.

Off-plan deals made up 65% of Dubai transactions in 2025, according to Betterhomes, meaning most purchases were for homes not yet built.

That pipeline may now face a far tougher market, with foreign appetite set to be the decisive factor.

On ​Wednesday, shares in Dubai and Abu Dhabi developers plunged.

Aldar Properties, Abu Dhabi’s largest listed developer, and Emaar Properties, the force behind downtown Dubai and the Burj ​Khalifa, both fell 5%, while bond prices of major developers dropped sharply.

Bond markets — a critical funding channel for UAE developers — are now ⁠effectively shut for new issuance, with spreads widening across the sector.

Some developers played down the selloff.

“In this region we know things start quickly and end quickly, and we overcome this ​because the fundamentals across the GCC (Gulf Cooperation Council) nations are strong,” said Ziad El Chaar, the CEO of Dar Global, the luxury developer behind a string of Trump-branded projects across the ​Gulf.

“Nothing is on hold … everything is on track,” he said.

Others said the fallout was already visible.

A senior real-estate banker told Reuters his firm had this week shelved a planned UAE property capital raising.

“Investors are not thinking at this stage of investing in the region,” he said, adding that the risk premium for UAE property had become “much higher”.

International lenders, he added, would face pressure to scale back new loans, potentially forcing asset ​sales if the conflict drags on.

Turbocharged rally

Dubai’s skyline has been transformed over two decades by staggering construction ambition.

Palm Jumeirah, once a radical land-reclamation experiment, is now an established luxury ​enclave; Palm Jebel Ali, a second, larger palm-shaped development, is rising from the Gulf with cranes tracing its outline.

Abu Dhabi has also been reshaping its coast through a quieter but equally determined ‌building push.

The ⁠real-estate rally accelerated after COVID-19, as the UAE’s tax-free regime, liberalised visas and economic reforms attracted wealthy migrants.

Russians fleeing the Ukraine war, billionaires, family offices and hedge funds poured money into property, drawn by zero income tax and a business climate aiming to rival global financial hubs.

By 2025, the UAE’s population surpassed 11 million, with expatriates making up nearly 90% of residents, one of the highest such proportions on Earth, according to official data.

Dubai real estate prices jumped 60% between 2022 and the first quarter of 2025, according to Fitch.

Growth continued ​late last year, with residential prices up ​nearly 13% year-on-year in the fourth quarter, ⁠according to property consultants CBRE.

Abu Dhabi residential prices rose almost 32% over the same period.

“The real effect on real estate should be measured on the level of demand once the conflict halts. That is where the true impact will be felt,” said Mohammed Ali ​Yasin, the chief executive of Ghaf Benefits, a Lunate company in Abu Dhabi.

He noted that listed developer stocks fell in line with ​the broader 5% market ⁠drop on Wednesday.

Foreign demand

Even before the US–Israeli strikes on Iran, analysts were warning about supply running ahead of population growth.

JPMorgan said last week that Dubai’s demographic expansion was unlikely to absorb the 300,000–400,000 new units expected by 2028.

“Foreign interest in purchasing property following the conflict will be critical,” Abu Dhabi Commercial Bank economists said in a note on Wednesday.

Expatriates ⁠and non-resident buyers ​are a crucial demand pillar, they added, with new supply expected to rise from the second half of ​this year and remain high through the next two.

The strikes hit just as that supply wave was gathering pace.

“Real estate investment typically relies on stability, visibility and sustained investor confidence, all of which tend to weaken during ​prolonged geopolitical uncertainty,” said Ryan Lemand, co-founder and CEO of Neovision Wealth Management in Abu Dhabi.