The end of the illusion of a safe Dubai? The real estate market faces a test

4. 3. 2026

Today, global markets are focused on the escalating conflict in the Middle East. However, this has only exposed a weakness and highlighted a risk that investors have long overlooked when purchasing real estate in Dubai, namely the issue of security and geopolitical stability. "The Dubai real estate boom was based primarily on price and yield growth, rather than on a deeper analysis of the region's long-term security or an understanding of its cultural and regulatory environment," says Filip Šejvl, managing partner of the Philip & Frank real estate agency. The current situation thus represents a fundamental test of confidence in the entire investment model and is causing increased nervousness in the market.

"Geopolitical uncertainty is a catalyst, not a cause. Dubai was showing signs of overheating even before the current escalation. If growth is too rapid and driven primarily by expectations of further growth, the system is structurally fragile," comments Šejvl.

According to him, the Dubai boom was largely based on capital dynamics, investor mobility, and massive construction. Real estate investment became a trend supported by media coverage, social networks, and stories of rapid appreciation. "If the main argument is that prices are still rising, it's not about stability, but about expectations. And expectations can change very quickly," adds Šejvl

The Philip & Frank real estate agency is part of the global LeadingRE (Leading Real Estate Companies of the World) network, which allows Filip Šejvl to monitor developments across regions and perceive structural risks in a broader context. "I never wanted to base my investment strategy on a region whose historical, cultural, and regulatory development I am not familiar with in detail. Stability is not a marketing slogan, but long-term market experience," he says.

According to him, the current situation has parallels with developments in the US before the mortgage crisis of 2007–2008, when rapid price growth and affordable financing created the illusion of permanent expansion. Similar warning signs also appeared in China after 2020, when extensive construction and a surplus of housing units led to a significant market correction.

The Dubai market has experienced extraordinary growth in recent years. In 2025, it recorded more than 215,000 real estate transactions with a total value of approximately AED 686 billion (roughly USD 187 billion), representing one of the strongest annual results in the emirate's history. Residential property prices rose by approximately 60% between 2022 and early 2025, with large-scale development projects being launched at the same time. Last year, Fitch Ratings warned that the combination of record supply—estimated at more than 200,000 new units planned for 2025–2026—could lead to a double-digit price correction.

"History shows that the combination of excessive construction and investments motivated primarily by returns is risky in the long term," warns Šejvl.

Several factors are currently working against Dubai. The highly international structure of owners means greater sensitivity to global investor sentiment. Unlike markets with predominantly domestic ownership, such as in the Czech Republic, capital can be quickly moved in times of uncertainty. At the same time, extensive construction of new projects continues, which puts pressure on prices when demand cools.

However, confidence is the key factor. Dubai has long been presented as a safe investment haven in the region. If security is called into question, the basic investment assumption changes.

According to Šejvl, several scenarios can be expected. In the short term, there may be, and probably already is, increased nervousness and efforts by some investors to reduce their exposure. This would put pressure on prices and market liquidity. In the medium term, the duration and intensity of geopolitical tensions will be decisive. "The longer the region is perceived as unstable, the more difficult it will be to restore confidence. The reputation of a safe destination takes years, not months, to rebuild," he adds.

According to him, foreign investment remains a legitimate part of portfolio diversification. "However, investors should ask themselves a fundamental question: do I understand this market deeply enough, or am I just reacting to its past dynamics? The security, legal stability, and long-term development of a country must be just as important as returns."