A cost shock landing unevenly
The most significant development in this cycle is not a launch or a price record — it is a divergence. A Moody's Ratings report, covered by Easternherald and The National, found that imported building material costs across the UAE have risen between 20 and 25 per cent compared with pre-conflict levels. The agency attributed the surge to supply chain disruption following the US-Iran military confrontation, which forced contractors to reroute shipments, accept longer delivery timelines and absorb the premium that came with both.
What matters for investors is not the headline number but how differently the two main markets are absorbing it. According to Moody's data reported by Easternherald, Dubai's off-plan transaction values fell more than 50 per cent in June compared with February. Abu Dhabi and Sharjah, by contrast, are holding up considerably better — and the reason is structural, not incidental.
Why Abu Dhabi is proving steadier
Dubai's market, despite record transaction years in 2024 and early 2025, draws disproportionately from international capital. When global investors reassess risk — because of regional conflict, elevated financing costs, or both — Dubai's off-plan volumes are among the first to reflect the shift. Abu Dhabi and Sharjah draw more heavily from domestic buyers and UAE residents, a demand base responsive to local employment and sentiment rather than offshore capital flows. As The National's coverage of the Moody's report put it, the two emirates are simply reacting differently to the same disruption.
That resilience has a longer runway. In an interview with Zawya Projects, Ben Crompton, Managing Partner of Crompton Partners Estate Agents, argued that foreign buyers and tight supply will underpin Abu Dhabi's housing market through 2030. It is a different demand engine from Dubai's — narrower, but less prone to the sudden swings that international sentiment can produce. For an investor thinking about drawdown risk during a period of global uncertainty, that distinction is worth its weight.
The developer buffer — and its expiry date
The cost surge is not hitting everyone at once. Moody's found that Aldar Properties, Emaar Properties, Damac Real Estate and Arada Developments entered fixed-price construction contracts and locked material costs ahead of the disruption. That protection extends roughly 12 months from signing, meaning pipelines that originated before the conflict are largely insulated. Pipelines that did not lock in pricing are not.
Moody's language was deliberately careful: "Contractors appear able to absorb the additional pressure for now," the agency said, noting that margins strengthened during the recent upcycle. But the buffer is time-limited. Crucially, Moody's flagged that "scale, reputation and operational capabilities are emerging as key differentiators" between developers that can sustain the pressure and those that cannot. Smaller developers that did not enter fixed-price contracts before costs rose face a materially harder position, carrying higher execution risk on projects sold at yesterday's prices.
This is the single most actionable line in the whole pack. When input costs jump and margins compress, the gap between a well-capitalised, disciplined developer and a thinly financed one stops being an abstraction and starts showing up in delivery timelines and completion certainty.
Capital is still moving at the top end
None of this points to a market in retreat. The National reports that Dubai recorded AED 252 billion in transactions in the first quarter, a 31 per cent annual increase, and Reuters/Zawya described the UAE real estate sector as showing robust first-quarter growth across both Abu Dhabi and Dubai. High-conviction capital is still being deployed: AHS Properties acquired the Shangri-La hotel on Sheikh Zayed Road from Abu Dhabi-based Mismak for AED 1.1 billion ($272 million), a 42-floor asset spanning around one million square feet, and plans to launch a AED 25 billion mixed-use development on the Dubai Water Canal in the third quarter. Its chief executive Abbas Sajwani told The National the company sold a $30 million apartment roughly a month earlier — "that shows the demand is continuing" — and confirmed plans to expand into Abu Dhabi.
So the picture is nuanced rather than negative. The prime and ultra-prime end remains liquid; the record Q1 numbers are real; and Abu Dhabi's domestic-anchored demand is behaving like the more defensive of the two markets during a period of imported-cost pressure and softer off-plan volumes in Dubai.
Reading the divergence
For an investor, the useful frame is this: the same shock has revealed the different risk profiles of the two emirates. Dubai offers depth, liquidity and international upside — with more sensitivity to global sentiment. Abu Dhabi offers a steadier, supply-constrained, locally-driven market that a credible agent expects to hold through 2030. Neither is better in the abstract; they suit different objectives. What the Moody's data does confirm is that developer selection now carries more weight than it did twelve months ago, because the cost buffer that is currently masking the pressure will not last indefinitely.
What stands out to me isn't the 25% cost jump — it's what it exposes. The same disruption pushed Dubai off-plan values down over half from February while Abu Dhabi barely flinched. That tells you exactly what each market is made of: Dubai runs on international capital, Abu Dhabi on domestic demand. Right now that makes Abu Dhabi the more defensive allocation. But the line I'd underline is Moody's on developers: scale and balance sheet are now the differentiators. The fixed-price protection at Aldar, Emaar, Damac and Arada runs about 12 months. Smaller, thinly-funded builders selling at old prices into rising costs are where delivery risk lives. In this environment I'd rather accept a slightly lower headline yield from a developer I trust to complete than chase a discount from one that might not.
What this means for investors
Practically, weight developer due diligence higher than usual. The cost surge rewards balance sheets, fixed-price contracts and delivery track records — and penalises the opposite. If you want lower volatility, Abu Dhabi's domestic-anchored, supply-tight market is behaving more defensively and a credible agent sees support through 2030; the trade-off is a narrower, less liquid buyer pool on exit. If you want Dubai's depth and upside, the softer June off-plan volumes may hand patient buyers better entry terms — but stick to established names whose pipelines are cost-protected. Either way, ask any developer directly whether their current phase is on a locked, fixed-price contract. That single question now separates projects that will complete on time and budget from those carrying real execution risk.
- The developer cost buffer is time-limited — roughly 12 months of fixed-price protection — so pressure could surface in later-launched phases.
- Dubai's off-plan values fell more than 50% June versus February, signalling real sensitivity to global sentiment and financing costs.
- Smaller, under-capitalised developers face higher execution and completion risk if they sold before costs rose.
- Further regional or supply chain shocks could deepen or prolong the materials cost surge beyond current estimates.
- Crompton's 2030 outlook for Abu Dhabi is one agent's view, not independently verified data.
- UAE Building Costs Up 25% After Iran Conflict as Supply Chains Reroute, Moody's Finds — Easternherald · 2026-07-02
- UAE contractors are absorbing higher building costs amid supply chain changes, Moody's says — The National · 2026-07-01
- Foreign buyers, tight supply to underpin Abu Dhabi housing market through 2030 — Zawya · 2026-07-20
- Developer AHS buys Shangri-La hotel in Dubai and plans to launch Dh25bn project this year — The National · 2026-06-10
- Higher deals keep UAE real estate sector robust — Reuters / Zawya · 2026-07-02
Figures are drawn from the sources above and were accurate as of 21 July 2026. This is market commentary, not personal financial advice.