Dubai's residential real estate market has seen a significant drop in transaction volumes as a result of the Middle East war. However, specific segments of the market are now experiencing a price correction, albeit a moderate one, according to S&P Global Ratings. 

That’s because of a change in market dynamics over the past several years, with the UAE's visa reforms supporting a higher proportion of long-term investors and end users.

"Our base case is that the Middle East disruptions will continue into 2027. This, together with new deliveries due in 2027-2028, could accelerate the price correction, particularly in investor-driven apartment segments," explained S&P Global Ratings credit analyst Sapna Jagtiani.

"However, if geopolitical risk subsides in 2027, Dubai’s supportive fundamentals and regulatory framework mean that we could expect a stabilization of residential real estate prices despite the additional supply," she stated.

In a Credit FAQ published today, titled "How Will The Middle East War Reshape Dubai's Residential Property Market in 2027?, S&P has addressed the impact of the conflict on residential property prices, developers’ credit ratings, liquidity and funding, as well as banks’ exposure to a potential market correction.

The report examines why Dubai residential property prices have declined only moderately in the seven months since the start of the war and outlines S&P’s expectations for the market in 2027.

It also assesses the potential rating implications for Dubai’s rated developers, including how payment delinquencies and construction delays could affect their funding sources and liquidity positions, said S&P Global Ratings in its statement. 

The report also outlines its expectations for capital expenditure and dividend payments by rated Dubai developers and examines the risks to Dubai banks if the correction in real estate prices accelerates, it added.