Why Abu Dhabi Is Holding While Dubai Off-Plan Cools

A single report reframes the UAE market

The most consequential piece of research to land this month is a Moody's Ratings report, released at the start of July, that quantifies two things at once: how much more expensive it now costs to build in the UAE, and how differently Dubai and Abu Dhabi are absorbing that pressure.

According to the report as covered by both The National and Easternherald, imported building material costs across the UAE have risen between 20 and 25 per cent compared with pre-conflict levels. Moody's attributes the surge to supply chain disruption following the US-Iran military confrontation, which forced contractors to reroute shipments, accept longer delivery timelines and pay the premium attached to both. In plain terms, a residential project that broke ground in early 2026 carries a materially higher cost base than the one its team modelled a year earlier.

The divergence that matters for investors

The headline construction number is important, but the more revealing data point sits underneath it. Moody's found that Dubai's off-plan transaction values fell more than 50 per cent in June compared with February. Abu Dhabi and Sharjah, by contrast, held up considerably better.

The reason is structural, not incidental. As The National reports, Abu Dhabi and Sharjah draw more heavily on domestic buyers and UAE residents — a demand base that responds to local employment and sentiment rather than offshore capital flows. Dubai's off-plan market, despite record transaction years in 2024 and early 2025, is disproportionately driven by international investors. When global capital reassesses risk, whether because of regional conflict, financing costs or both, Dubai's off-plan volumes are among the first to reflect the shift.

That is the core insight of the Moody's work: the same disruption lands unevenly because the two markets are built on different foundations of demand. Abu Dhabi's relative stability here is not a coincidence — it is the product of who is actually buying.

Big developers are insulated — for now

Moody's is careful about how it frames the cost pressure. The rating agency found that Aldar Properties, Emaar Properties, Damac Real Estate and Arada Developments had entered fixed-price construction contracts and locked material costs ahead of the disruption. That protection runs roughly 12 months from signing, meaning pipelines that originated before the conflict are largely shielded from the cost surge.

Contractors, Moody's says, "appear able to absorb the additional pressure for now", helped by margins that strengthened during the recent upcycle. But the buffer is time-limited. The agency notes that "scale, reputation and operational capabilities are emerging as key differentiators" — and warns that smaller developers who did not lock in pricing carry higher execution risk. This is the line investors should read twice: the gap between large, well-capitalised developers and smaller ones is widening, and it will show up first in delivery timelines and completion certainty.

A robust quarter, then a cooling month

There is a timing nuance worth being honest about. A Reuters/Zawya report described the UAE real estate sector as showing robust growth in the first quarter of 2026, with rising transaction volumes across both Abu Dhabi and Dubai. Separately, The National reports that Dubai recorded Dh252 billion in transactions in the first quarter — a 31 per cent annual increase.

Those figures are not in conflict with the June cooling; they describe different windows. Q1 captured continued strength; the Moody's June-versus-February comparison captures a more recent softening in Dubai off-plan specifically. The takeaway is that momentum through early 2026 was real, and that the recent pullback is concentrated in the most investor-sensitive corner of the market rather than across the board.

Conviction at the top end

Against this backdrop, the behaviour of well-capitalised players is instructive. AHS Properties, founded by Abbas Sajwani, acquired the Shangri-La hotel on Sheikh Zayed Road from Abu Dhabi's Mismak — a unit of First Abu Dhabi Bank — for Dh1.1 billion ($272 million), as reported by The National. The company also plans to launch a Dh25 billion ($6.8 billion) mixed-use development on the Dubai Water Canal in the third quarter, and Sajwani said AHS intends to expand into Abu Dhabi. He pointed to a recent $30 million apartment sale as evidence that top-end demand is continuing.

One developer's ambition is not a market signal on its own, but it does show that the players with balance sheets and locked-in cost protection are still committing capital.

The Abu Dhabi thesis

Looking further out, a Zawya interview with Ben Crompton, Managing Partner of Crompton Partners Estate Agents, framed foreign buyers and tight supply as forces expected to underpin Abu Dhabi's housing market through 2030. The full detail available is limited, but the direction of travel is consistent with the Moody's picture: a market with a steadier demand base and constrained supply tends to weather external shocks more gracefully than one leaning heavily on mobile international capital.

For an investor, the month's data does not say Dubai is broken and Abu Dhabi is safe. It says the two markets carry different risk profiles, that construction costs have genuinely risen, and that developer quality now matters more than it did a year ago.