DUBAI, U.A.E.: Iranian missile strikes on key sites in the United Arab Emirates have shaken confidence in one of the world's fastest-growing property markets, raising questions about the sustainability of a years-long real estate boom fueled largely by foreign investment.

The attacks targeted airports, ports, and residential areas in Dubai and Abu Dhabi, denting the Gulf's reputation as a haven for global capital. The disruption comes at a time when analysts were already warning that the region's rapid construction boom could be overheating.

Developers that had been selling off-plan projects within hours now face a more uncertain demand environment as geopolitical risk weighs on investor sentiment.

Off-plan purchases, homes sold before construction is completed, accounted for 65 percent of Dubai property transactions in 2025, according to brokerage Betterhomes. That large pipeline of unfinished projects could become more vulnerable if overseas buyers pull back.

Markets reacted swiftly to the escalation. Shares of major property developers in Dubai and Abu Dhabi fell sharply on March 4. Aldar Properties, Abu Dhabi's largest listed developer, and Emaar Properties, the company behind downtown Dubai and the Burj Khalifa, both dropped about five percent.

Bond prices for major developers also declined, and analysts say debt markets, a key source of funding for large real estate projects, have effectively shut for new issuance as borrowing costs rise.

Some industry leaders sought to downplay the significance of 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 several Trump-branded projects across the Gulf.

"Nothing is on hold ... everything is on track," he said.

Others say the effects are already emerging. A senior real estate banker told Reuters his firm has postponed a planned property capital raising in the UAE this week.

"Investors are not thinking at this stage of investing in the region," he said, adding that the risk premium attached to UAE property has become "much higher."

He said international lenders could face pressure to limit new loans if the conflict persists, potentially forcing developers to sell assets.

Construction Boom Fueled by Global Money

Dubai's skyline has been transformed over the past two decades by ambitious real estate development. Projects such as Palm Jumeirah, once viewed as an audacious land-reclamation experiment, have become established luxury districts, while a second development, Palm Jebel Ali, is now rising offshore with cranes outlining its palm-shaped design.

Abu Dhabi has also reshaped its coastline through an extensive development push.

The latest property rally accelerated after the COVID-19 pandemic, when the UAE's tax-free environment, relaxed visa rules, and economic reforms attracted wealthy migrants and investors.

Russians leaving after the war in Ukraine, along with billionaires, family offices, and hedge funds, poured money into the country's property market, drawn by zero income tax and a business environment designed to compete with global financial hubs.

By 2025, the UAE's population had surpassed 11 million, with expatriates accounting for nearly 90 percent of residents, according to official data.

Real estate prices surged during that period. According to Fitch, Dubai property prices rose 60 percent between 2022 and the first quarter of 2025. Residential prices continued climbing late last year, increasing nearly 13 percent year-on-year in the fourth quarter, property consultancy CBRE said.

In Abu Dhabi, residential prices rose almost 32 percent 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, chief executive of Ghaf Benefits, a Lunate company in Abu Dhabi.

He noted that property stocks fell broadly in line with the overall market decline of around five percent on March 4.

Reliance on Foreign Demand

Even before the latest escalation, analysts had warned that supply could soon outpace population growth.

JPMorgan said last week that Dubai's population expansion would likely be insufficient to absorb the 300,000 to 400,000 new housing units expected by 2028.

"Foreign interest in purchasing property following the conflict will be critical," economists at Abu Dhabi Commercial Bank said in a research note on March 4.

They said expatriates and overseas buyers remain a crucial source of demand, particularly as new housing supply is expected to accelerate from the second half of this year and remain elevated through the next two.

The missile strikes occurred just as that wave of new construction was gathering momentum.

"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.