Dubai’s real estate sector elicited attraction not only from international investors but also from buyers on the lookout for stable assets.
There was hardly any doubt that the Trump tariffs would send the global economy reeling. Regardless of each country’s desperate attempts to minimize the damage, it will certainly take a few years before international economic health is restored.
Being centrally located is one of Dubai’s greatest geographic advantages. The UAE is taking over the Middle East as a hub of technological and economic prosperity, and its geostrategic edge is an undeniable factor in facilitating this rise. Dubai’s property prices have increased by 70% over the past four years, outperforming other cities. However, that growth is now threatened by Trump’s tariffs.
These global tensions are a major risk to the property market which has usually been bullish. Dubai’s real estate sector elicited attraction not only from international investors but also from buyers on the lookout for stable assets. Investor and developer morale has taken a serious hit, as costs are driven up and the supply chain is disrupted.
These tariffs also coincide with the UAE government’s efforts to diversify the economy and reduce its dependence on oil revenue. However, even the Emirates’ laisses-faire policies are not enough to protect the domestic economy from becoming a casualty of this international trade war.
Real estate is taking a hit as the newly imposed tariffs are affecting the construction sector, as the cost of raw materials such as steel and cement has jumped. Many developers are concerned that raising tariffs on imported materials will leave them no choice but to mark up the prices of newly developed projects like houses and commercial properties.
This will therefore slow down demand as potential buyers and investors would be reluctant to invest in higher-priced assets. Reduced international investments also mean that capital flowing into the property market will shrink, causing serious challenges to sustain its property price increases.
Despite the government’s best efforts, market anxiety had already pulled down prices, with last year’s property prices recording 16% less compared to the 20% of the previous year, as buyers were already weary of big increases. According to analysts, the real estate slowdown will also be fuelled by a decline in crude oil prices, resulting in fewer jobs for expats, who have been the driving force of the property market.
Crude oil has dipped below $65 a barrel, and as international investments reduce, the real estate and the oil sectors alike will report serious downtrends. Foreign investors are unlikely to pump in money to Dubai if their home markets are grappling with uncertainty. The prosperity of Dubai’s property has been closely intertwined with crude oil prices as in 2014 and 2020, the market shrank, as oil prices crashed. During this period, average home prices fell around 33% as oil prices declined, bringing down state revenues.
Market experts have also warned that should oil prices hover around $60 a barrel, it could have serious repercussions on job prospects and lower economic activity in the long run. Bloomberg reported that according to researcher Knight Frank, residential values in the Emirati city expanded by 69.8% between November 2020 and December 2024. This was because of liberal visa policies, which in turn attracted foreign investors.
Analysts believe the UAE is in a more stable position now as oil prices may not have as much of a bearing as they did in the past. The government’s measures of extending golden visas and similar long-term policies encourage investors to stay on even during a downtrend. With the greenback sliding down, investors have more opportunities to invest, as the Gulf economy is closely tied to the US dollar.
There are multiple challenges ahead for Dubai’s property market, however, all hope is not lost, as the recently announced tariff relaxations could be extended to the real estate sector as well. The Emirates’ inherent geographic and economic advantages will definitely help Dubai’s underperforming sectors stabilise sooner rather than later.
